CEWS and SR&ED – What You Need to Know
The Canada Emergency Wage Subsidy (CEWS) was implemented in April of 2020, offering assistance for employers to rehire or keep employees if their revenue decreased due to COVID-19. As a form of government assistance, any company that used this program will see it impact their SR&ED claim.
Line 431 of form T661 requests you to report any government assistance. Typically, this line is looking for IRAP grants and any other government funding, but with the advent of the wage subsidies, you might find the total for this line higher than you anticipated. Government assistance is deducted from the qualified expenses, reducing the overall eligible credit.
It’s important to note that, in the same way that only qualified expenses are included, only qualified assistance is included. So if you received $10,000 in funding through CEWS and $7,000 went to salaries for employees actively engaged in SR&ED, only $7,000 needs to be reported on this line. The remaining would be reported as income earned. Being aware of these conditions will be crucial to getting the most out of your credit. And remember, documentation will be key to justifying the numbers reported.