Canada has a rich but complex set of tax rules to help businesses carry out scientific research and experimental development (“SRED”). The rules include a simpler “proxy method” for calculating the expenses that qualify for tax incentives.
CalAmp hoped to include bonuses it paid to some of its employees when it was sold and became a public corporation trading shares in the US. For Justice Bedard, the only question was whether the bonuses could “reasonably be considered to relate to” the SRED work.
Because management paid the bonuses to give the employees a share in the sale price and to encourage them to stay with the new owner, Bedard J. thought that the bonuses did not “relate to” the SRED work. So, the bonuses didn’t qualify for tax incentives for research and development.
The TCC decision does not say that bonuses can not qualify for SRED credits. The reasons turned on the facts that the bonuses (a) were completely different from the usual Christmas bonuses paid to these employees, in timing, purpose and amount and (b) didn’t relate to SRED carried on in that tax year. (Paras. 36-43.)
See CalAmp Wireless (2013 TCC, Bedard)