Flavor Net – Tax Court of Canada finds that a substantial technical challenge was not sufficient to render a novel product development effort SR&ED
A taxpayer in the energy drink business sought to develop a beverage containing a mixture of 800 milligrams of plant sterols in a two-ounce format. This was more challenging than what Cargill had succeeded in doing, which was to disperse 400 milligrams in an eight-ounce serving. Notwithstanding this challenge (which was not met), the taxpayer’s work did not qualify as SR&ED given that it used only methods and techniques that were available in the industry, and there was no formulation of specific hypotheses related to technological risk or uncertainty. Although D'Auray J did not dwell on this, it also did not help that the research assistant lacked a science background.
Neal Armstrong. Summary of Flavor Net Inc. v. The Queen, 2017 TCC 179 under s. 248(1) – SR&ED.