SR&ED Features in the 2008
Canadian Federal Budget
> Increased cash refund benefit for CCPCs
> Limited eligibility for salaries paid to Canadians working on R&D outside Canada
Ottawa, February 26, 2008 – Finance Minister Jim Flaherty delivered the 2008 federal
budget to parliament today. Although still subject to parliamentary review, it is generally
expected that the budget will garner sufficient votes to pass into law in early March.
While this is the third budget to emerge from Stephen Harper’s Conservative government, it
is the first to make any real changes to the SR&ED program.
From an SR&ED perspective, the main attraction of Flaherty’s 2008 budget is that it allows
small and medium sized Canadian controlled corporations (i.e. “CCPCs”) access to a larger
portion of their SR&ED benefits in the form of a cash refund instead of investment tax
credits. In short this means that these companies can access more of their SR&ED credits
sooner to bootstrap growth now instead of waiting until they become taxable - which for
many high-tech start-ups is a five year horizon.
However, the budget stopped short of allowing cash refund benefits to non-CCPC
(i.e. foreign owned or publicly traded) entities as had been strongly lobbied for by many
industry groups – most notably the biotech sector. We remain hopeful that Ottawa may yet
introduce a flow-through share scheme. This would be particularly welcome in the biotech
community, where there are relatively few CCPC’s, since even early stage start-ups must
recruit venture capital to offset the high cost of clinical trials and related approval work
unique to that sector.
David R. Hearn, Managing Director
Michael C. Cadesky, BSc, MBA, FCA
R&D Tax Credit Specialists, Canada & Abroad
NUMBER 34 | FEBRUARY 27, 2008
| FEBRUARY 27, 2008
| PAGE 2
More Cash for CCPC’s
The budget delivers more cash to CCPC’s by adjusting three different aspects of the SR&ED tax credit
1. Expenditure Limit: Currently CCPC’s get a full