Establishing an SR&ED Contract

Many companies contract individuals and entities to contact SR&ED activities on their behalf.   The contact must be explicit in certain items so as to ensure that the payment made under the contract will be a valid expenditure for SR&ED claim.   The following are three key factors that the contract must address:

1.   The contract must indicate that the contractor was required to perform specific SR&ED work (e.g. "the contractor shall design, integrate, test, verify performance")  In additions, the contract should specify that the contractor has to comply with certain specification in performing the the required tasks.

2.      Avoid ceiling price clause in the contract since this indicates that the SR&ED work was at the risk of the contractor and not on at the risk of the payer.

3.      Ensure that the rights to the Intellectual Property of the SR&ED work belong to the payer.

For more details see Revenue Canada's position (Application Policy SR&ED 94-04).