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.