Bill C-4 was tabled on March 21, 2013, and proposed ammendments to the Income Tax Act. This bill has received royal assent and has become law.
A summary of the new ammendments are as follows:
- Undeducted SR&ED expenditures from before an acquisition of control may be carrieed forward for use in the current year only if the business to which the expenditures relate is carried on throughout the current year by the corporation for a reasonable expectation of profit and only to the extent of its income for the current year.
- A penalty of $1,000 can be levied in the case of false or incomplete information disclosure of the identity of and the terms of any arrangement with the SR&ED claim preparer.
Finance Minister Mike de Jong announced that British Columbia will extend the Scientific Research and Experimental Development (SR&ED) provincial tax credit for an additional three years until September 2017. According to provincial Finance Ministry figures, the tax credit was worth $154 million to B.C. companies in 2013-14, with expectations it will represent about $99 million in 2014-15 and $180 million in 2015-16.
The RCMP has completed a 6-year investigation into an alleged fraud scheme at the CRA by laying 142 charges against 8 former CRA officials and 7 businessmen. Launched in 2008, the investigation looked into allegations that senior CRA auditors received bribes to turn a blind eye to millions of dollars in unpaid taxes and fraudulent tax credit claims.
According to the last round of charges, 3 CRA auditors (Americo Comparelli, Adriano Furgiuele and Antonio Girardi) were phantom shareholders in a firm called Delvex, that assisted firms apply for tax credits, including fraudulent SR&ED tax credit claims. Delvex is alleged to have collected a quarter of the total value of the SR&ED claims that were submitted.
The RCMP also announced that they have laid charges against former CRA officials Adriano Furgiuele and Nicola Iammarrone in relation to an alleged bribe from businessman Francesco Bertucci. According to the RCMP statement, Mr. Bertucci allegedly evaded payment of more than $2-million in federal taxes in relation to a business investment loss after securing the co-operation of the former CRA officials.
Revenue Minister Kerry-Lynne Findlay said in a statement that the government will hold CRA officials to the “highest ethical standards.”
Posted in SR&ED News
In a recent article in the Financial Post, Julie Bond, a SR&ED tax consultant, opined that the recommendation in the Jenkins Report to reduce the refundability of SR&ED tax credits and to move towards a grants-based system will stifle innovation for Small to Medium-sized Enterprises (SMEs).
“Grants are not practical. With grants, you would have small and medium-sized companies stop a project, write a business plan, send it in to a bureaucratic organization, wait three months for a response, and if they’re approved, then go back to and finish the project,” Ms. Bond says. “By that time, they’ve lost the job.”
According to Corinne Pohlmann, Vice-President of National Affairs at CFIB, small businesses were not represented on the Jenkins panel. The CFIB recently sent a letter to Finance Minister Jim Flaherty to make their views from a SME perspective known.
While there was very little mention of the SR&ED program in the latest 2014 federal budget, the federal government announced that it will be investing $1.5 billion over the next 10 years through the Canada First Research Excellence Fund, to fund research at post-secondary institutions.
No additional legislative changes were announced pertaining to the SR&ED program for this fiscal year.