Minimize CEWS deduction from your SR&ED

CEWS-SRED Problem and Our Solution

The Problem

The Canada Revenue Agency has confirmed that money received through the Canadian Emergency Wage Subsidy (CEWS), will claw back SR&ED funding. This poses a huge problem for many companies. If you received the Canadian Emergency Wage Subsidy (CEWS) in 2020 or 2021, your SR&ED claim will be complicated by CEWS money received. This will result in loss of SRED funding and/or significant SRED audit risk.

If you deducted too little (or zero) CEWS from your 2020 SRED, that’s a clear-cut CRA audit red flag.  Call g6 immediately to fix these errors and to “audit-proof” you. More likely, you OVER-deducted CEWS from your 2020 filed SRED.  This scenario is more fun!  The CRA instructions from June 16, 2020 regarding CEWS receipts and SR&ED eligible expenditures state the following:

From the CRA: “The Canada Emergency Wage Subsidy and the 10% Temporary Wage Subsidy for Employers are considered government assistance. Assistance received under either wage subsidy reduces the amount of expenses eligible for SR&ED investment tax credits”

Many companies see this instruction, see their large CEWS receipts for 2020 vs their relatively small 2020 SRED expenditures, and reduced (or plan to reduce) their SRED salary expenditures to zero. That over-deduction unnecessarily drops your 2020 SRED credits by up to 65%. Or even worse, companies reduce their entire 2020 SRED expenditures to zero. Which of course puts your SRED credits received in 2020 to zero.

What We Do

G6 Consulting has developed Canada’s first software that programmatically disentangles all SR&ED from CEWS removing the overlap and only the overlap between SR&ED and CEWS monies received. This allows businesses to preserve the bulk of their SR&ED claim and remain fully compliant with CRA rules.