Formadrain – Tax Court of Canada finds that improving the process for repairing drains qualified as SR&ED

It needn’t be rocket science to qualify as SR&ED. A taxpayer which repaired sewers and drains from the inside rather than through excavation, successfully claimed scientific research & experimental development credits for its work on a new approach involving developing a single-use light mandrel (i.e., tube) to facilitate the installation of a sheath from inside the drains, and a system for doing so from a single access point from inside a building (as opposed to using a heavier non-disposable mandrel that required two points of access in order to pull rather than push it.)

Respecting a Crown argument that the source of technological uncertainty respecting the project was “entirely in the chemical composition of the material [forming the mandrel], a task which was delegated to a rubber manufacturer,” D’Auray J noted that para. (d) of the SR&ED definition contemplated development work undertaken in Canada on behalf of the taxpayer and that there was more going on than just formulating the chemical composition of the mandrel. Also, the approach of the taxpayer’s engineers (who kept a detailed notebook of planned trials and results) was too systematic to be labelled the trial and error method.