Guidance: How the Canada emergency wage subsidy affects SR&ED claims 19 February 2021 CRA Webpage

Distinction between directly engaged and directly attributable

SR&ED salary and wages

There are two types of salary and wages that can be claimed for SR&ED:

• Directly engaged salary or wages are paid to employees doing hands-on SR&ED work based on the time spent. They are claimable under the traditional method or the proxy method.
• Directly attributable salary or wages are paid to employees directly undertaking, supervising, or supporting SR&ED work and to employees whose salary or wages are directly related and incremental to SR&ED work, such as the wages of clerical and administrative staff, based on the time spent. Directly attributable is a broader type than directly engaged. Salary and wages not directly engaged are reported as overhead and other expenditures on Form T661, Scientific Research and Experimental Development (SR&ED) Expenditures Claim, and can only be claimed using the traditional method.

Example showing application of CEWS in computing ITCs under the traditional and proxy methods

Example of the Canada emergency wage subsidy applied to an SR&ED claim

• The corporation’s lead engineer (Sarah) spends all of her time for a 12-week period directly engaged in an SR&ED project and does non-SR&ED work for the rest of the year. The only relevant overhead expense is the salary of her administrative assistant (Jamaal), who spends 30% of his time during the same period tracking the SR&ED project costs and its progress. His salary can be claimed as overhead and other expenditures under the traditional (not the proxy) method only.
• Under the traditional method, the corporation’s qualified expenditures are calculated as the salary paid to Sarah during the 12-week period plus 30% of Jamaal’s salary for that period minus all and 30%, respectively, of the CEWS received by the corporation in relation to their respective salaries for that period.
• Under the proxy method, its qualified expenditures include only Sarah’s salary for the period, but are grossed-up by the 55% prescribed proxy amount, and that total is reduced by all and 30%, respectively, of the CEWS received by the corporation in relation to their respective salaries for that period.

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