Calculate qualified expenditures

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.

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 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)

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
  - In this case, complete Form T1145, Agreement to Allocate Assistance for SR&ED Between Persons Not Dealing at Arm’s Length
- 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.

Call us if you have any questions about the SR&ED program or calculating your qualified expenditures.