Calculate qualified expenditures
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Expenditures that qualify for an ITC
To claim an SR&ED investment tax credit (ITC), you will need to determine the SR&ED expenditures and other amounts that qualify for an ITC.
Adjusting your qualified expenditures
Your qualified SR&ED expenditures start with your total allowable SR&ED expenditures that you adjust according to amounts you paid or received.
Amounts that increase your expenditures
Amounts that increase your qualified expenditures include:
- Payment of unpaid amounts from previous years
- Prescribed proxy amount (if you used the proxy method)
- Qualified expenditures that were transferred to you (refer to section Transferring non-arm’s length expenditures)
Amounts that reduce your expenditures
All assistance and contract payments that you may receive for SR&ED will reduce your qualified expenditures. These may include:
- Provincial and territorial assistance (if not renounced in your province or territory)
- Other types of government or non-government assistance
- 20% of contract payments and third-party payments
- Non-arm’s length transactions
- Adjustments to your purchases (limited to costs) of goods and services from non-arm's length suppliers
- Qualified expenditures you transferred
- Assistance allocated to you
- Expenditures for your non-arm’s length SR&ED contracts
Transferring non-arm's length expenditures
Even if these expenditures do not qualify for SR&ED expenditures for ITC purposes, the performer may transfer all or part of their qualified SR&ED expenditures to you.
To transfer expenditures, both the claimant and the performer must use:
- Form T1146, Agreement to Transfer Qualified Expenditures Incurred in Respect of SR&ED Contracts Between Persons Not Dealing at Arm's Length)
Both the claimant and the performer must submit fully completed Forms T1146 and T661 by their respective income tax due dates.
To learn more about calculating expenditures for an ITC, review Part 4, T4088, SR&ED Expenditures Claim - Guide to T661.
Get support with your qualified expenditures
Review the policy for qualified expenditures
Review the guide to the SR&ED expenditures claim
Call us if you have any questions about the SR&ED program or calculating your qualified expenditures.
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