SR&ED for Medical Professionals

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Last week, the CRA released a memo entitled “SR&ED claims made by physicians and Medical Professional Corporations – Information for claimants” to clarify its position on SR&ED claims in this sector.

This memo outlines some of the new and existing considerations when Medical Professionals (MP) file for SR&ED claims. The memo characterizes the most prevalent scenarios found for how SR&ED work is done with MPC (Medical Professional Corporations), HCE (Health Care Entities – universities, hospitals, health care agencies, health networks, etc.) and Physicians (Individual medical professional).  The memo outlines the various SR&ED related implications of the models involved, clarifies the CRA position and guides taxpayers on how issues may be avoided.


SR&ED claims have been made by Medical Professionals for many years and typically these are specialist physicians that have clinical practices in addition to research interests in their specialty area. The research involve scientific research and thus SR&ED claims were quite prevalent in this group. Sometimes this research is self-funded but more often it is funded by HCE or Pharmaceutical companies. We have been hearing recent reports of many SR&ED claims for MP (in particular in Ontario and Quebec) in dispute with CRA where the CRA “did not like” accepting SR&ED for MP.  We heard from many sources that CRA was taking every opportunity and angle to deny SR&ED claims to this group.


The major issues involved in MP SR&ED claims are related to 1) assistance of the work 2) contract payments and 3) who is doing the work. For assistance, SR&ED eligible expenditures must be reduced by government assistance, non-government assistance or any inducement. This is a broad swath and covers broadly many aspects of how R&D by MP’s are funded. This is not new and so where the SR&ED work is paid for by another entity you must reduce your expenditures by this amount. The issue of contract payments is one wherein the program is design to incent the “net costs of doing R&D”. Where there is another Canadian taxable supplier paying for the work your SR&ED claim must be reduced by this amount (effectively reducing your claim to 0 expenditures) unless you can prove that there is significant financial risk you are incurring. The issues of who is doing the work was issue that CRA has contested with as it relates to MPC’s (Medical Professional Corporations).  The main position from CRA was that a hospital paying for a R&D study done by Dr. John Doe is not the same as the hospital paying for a study done by Dr. John Doe Professional Corp.


While this memo does attempt to characterize the various working relationships it presents three main implications:

1. Government-funded entities in healthcare are usually considered government assistance for SR&ED purposes which reduces the eligible SR&ED expenditure amount. 

2. Physicians and Corporations are distinct entities which should not be conflated for SR&ED purposes. If the agreement is between an Individual Physician and the Hospital then a SR&ED claim at the corporate level will be denied unless documentation proves otherwise. Consulting and research agreements with MP’s should be directed to the MPC and not the individual to obtain the greatest tax benefits. The CRA memo suggests that Physicians should normally claim SR&ED as Individuals however as a sole-proprietor he/she does not take a salary and thus will have little to no eligible SR&ED expenditures as an Individual.

3. Documentation is key. The CRA stresses the importance of current and accurate documentation to support the research agreement; who is paying, the scope and who is involved. Where possible, any SR&ED work which is intended to be done by an MP within a MPC must have contracts which explicitly state the involvement of the Corporation and not the Individual practitioner.

The CRA memo introduces the notion frequently of MP claiming SR&ED as Individuals. From a tax planning perspective, Individual MP are not only limited in the amount of eligible SR&ED expenditures they can incur (as they don’t have T4 wage expenses) but also their SR&ED is at the non-enhanced 15% ITC rate with non-refundable tax credits. Further, the new 2019 Federal Budget eliminates the taxable income threshold for the SR&ED enhanced rates and we saw this announcement as a particular benefit for Physician Corporations (and other Canadian-Controlled Private Corporations) that could now enjoy SR&ED Investment Tax Credits at the enhanced 35% SR&ED Investment Tax Credit rate since many of them fall in between the $500,000 to $800,000 taxable income bracket.

In summary, ENTAX advises all Medical Professionals that claim SR&ED and their advisers to read the memo and revisit the fact patterns surrounding their SR&ED claim. Ensure all documentation is detailed and updated and all parties understand the role they play in the research project.

ENTAX is a professional SR&ED advisory firm and has assisted many Medical Professionals and their advisors in optimizing and preparing their SR&ED claims. Please visit us at to learn more or book a complimentary meeting with us.


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