T4 LABOUR EXPENSES
The wages and salaries given to workers who are directly engaged in completing R&D work that qualifies for the SR&ED program are included in T4 labour expenses. T4 labour expenses comprise salary, wages, and other compensation paid to these individuals, who are frequently referred to as “eligible employees.”
According to the rules of the program, the T4 labour expenses must be specifically related to eligible SR&ED activities.
The assertion needs to be supported by proof, timesheets, and records of the employees’ involvement in and contributions to the R&D project.
Costs incurred by the company when it employs another organization or person (a subcontractor) to carry out particular R&D responsibilities on its behalf are referred to as subcontract expenses. This outsourced work may be a component of the broader R&D project for the company. Although there are several restrictions and requirements, subcontract expenses are eligible for SR&ED tax incentives:
The subcontractor’s work must satisfy the requirements for “qualified SR&ED work” as specified by the program’s rules.
The company is required to keep accurate records and proof of the type of subcontracted work and its program eligibility.
The same SR&ED guidelines and limitations apply to the subcontractor’s costs as they do to the company’s own costs.
Working closely with a tax consultant or consultant who is knowledgeable about the SR&ED program and the details is advised while creating an SR&ED claim. They can assist in making sure that your claim is correct, properly supported, and in accordance with the guidelines of the program. To support your claim in the event of a CRA investigation or audit, accurate documentation is essential because the SR&ED program can be complicated.