Focus Micro Ondes – Court of Quebec finds that general estimates of SR&ED proportionate time by the company president were insufficient for Reg. 2900(2)(b) purposes

The claim of the taxpayer for the portion of the salaries of its employees that directly related to the prosecution of SR&ED as described in Reg. 230R1(b) pursuant to the Taxation Act (similar to Reg. 2900(2)(b) under the ITA) was determined on the basis of the president’s estimates made after the year of the percentage of their salaries that represented such involvement based on his perception of the efforts of those employees in the various SR&ED projects. No time sheets were kept.

In affirming the ARQ denial of 2/3 of the salary amounts claimed for the purposes of the SR&ED credit, Chalifour JCQ stated:

The arbitrariness of an officer relying on his knowledge of the business is not sufficient to demonstrate the proportion of salaries eligible for a tax credit.

Neal Armstrong. Summary of Focus Micro Ondes Inc. v. Agence du revenu du Québec, 2022 QCCQ 2070 under Reg. 2900(2)(b).