Issue 414, February 2016

In an October 27, 2015 Tax Court of Canada case (Acsis EHR Inc. vs. H.M.Q., 2012-4645(IT)G), at issue was whether the taxpayer could claim SR&ED expenditures in the amount of $278,104 and $269,690 for the years 2005 and 2006, which corresponded to $125,858 and $113,573 of Investment Tax Credits. The taxpayer was engaged by the country of Belize to implement a new national healthcare information system, however, after encountering significant challenges such as poor telecommunication infrastructure, the taxpayer conducted SR&ED activities to adapt its existing technology to overcome the challenges.

executing the scientific method

Taxpayer wins
The Court found that the documentary evidence, coupled with oral testimonies, supported the finding that the taxpayer engaged in systemic investigations and undertook tests to resolve the technological uncertainties. The taxpayer identified problems with the project, developed its objectives, formulated hypotheses and testing scenarios, and modified or re-developed its approach in response to the results it obtained.

The Court also noted that although the taxpayer did not retain detailed records, its approach was similar to the scientific method in that uncertainties and objectives were identified, and hypotheses, trials and testing were formulated.

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