CEWS and SR&ED

Canada Emergency Wage Subsidy (CEWS) is government assistance and must be deducted from SR&ED. Claiming CEWS […]

CEWS and SR&ED

CEWS and SR&ED

Canada Emergency Wage Subsidy (CEWS) is government assistance and must be deducted from SR&ED.

Claiming CEWS and SR&ED is new for 2020.  And it’s a bit tricky.

The CRA has confirmed that CEWS is considered to be government assistance with respect to SR&ED so it must be deducted from SR&ED expenses on some “reasonable” basis.

There is no formal methodology available from the CRA for deducting CEWS from a 2020 SRED claim.

It’s critical to deduct only a “reasonable” CEWS amount from SR&ED expenditures.

We know that government assistance is only deducted from SR&ED expenditures when the assistance is “in respect of” SR&ED work.  Therefore we need to match CEWS subsidies to SR&ED salary expenditures.

In summary then, the amount of the CEWS deduction must be calculated person by person based on the percentage of time that person spent on SR&ED work    This can be stated as a formula as follows:

CEWS deducted from SR&ED expenditures = % of time spent on SR&ED x CEWS received.

This formula looks simple, but it can be difficult to apply in practice. So the formula above to calculate the appropriate amount of CEWS for a company to deduct must be calculated per SR&ED employee per CEWS claiming period.

CEWS can’t reduce your SR&ED claim to zero.

CEWS deductions do not reduce a SR&ED claim’s proxy amount.

For more Information on CEWS and SR&ED, contact the experts @ Pinnacle Consultants!

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