Tax Court of Canada Rules Valuable Credits Available to Medicine Professional Corporations
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The Tax Court of Canada recently released a decision clarifying the availability of valuable scientific research and experimental development (SR&ED) tax credits to doctors performing medical or scientific research. This decision is the result of an appeal by Andre Lamy Medicine Professional Corporation (MPC) with respect to its SR&ED claims that had previously been denied.1 Background The MPC was incorporated in 2008 by Dr. Lamy, a cardiac surgeon and researcher. The MPC was engaged in the business of practicing medicine and activities related to the practice of medicine. Dr. Lamy stated at the hearing that these activities included research that he performed on behalf of the MPC. Furthermore, pursuant to an employment agreement between Dr. Lamy and the MPC, any money or securities that he earned with respect to research and his medical practice billings were received for, or on behalf of, the MPC. The SR&ED projects for the tax credits claimed by the MPC were carried out under research agreements executed by Dr. Lamy as Principal Investigator and the Hamilton Health Sciences Corporation and McMaster University, and were funded by third-party grants. At the hearing, Dr. Lamy testified that neither he nor the MPC received any grant monies apart from his salary, which was paid by the MPC. Dr. Lamy further testified that he signed the research agreements in his capacity as an employee of the MPC because he provided the services specified in the research agreements. Decision The sole issue before the Court was who carried out the SR&ED work: the MPC or Dr. Lamy. The Minister asserted that Dr. Lamy had carried out the SR&ED in his personal capacity and not as an employee of the MPC. This position is frequently taken by the Canada Revenue Agency (CRA) during the review of SR&ED claims made by MPCs and has caused much debate. Consequently, the Court formulated its decision based on Dr. Lamy’s testimony, the statement of agreed facts (SAF) and the documentary evidence presented. The Court highlighted from the SAF that “[t]he MPC was the medical professional corporation of Dr. Lamy and carried out the business of performing cardiac surgery, providing associated medical care to patients and researching improvements in cardiac surgical methodology and clinical outcomes.” The Court stated that, since Dr. Lamy was the only employee of the MPC, he was the only one conducting the business of the MPC (i.e., performing surgery, providing care to patients, and conducting medical research). The Court concluded that any activities of Dr. Lamy relating to the business of the MPC were activities of his employer, the MPC. Based on this finding and the available evidence, the Court ruled that the MPC was entitled to the SR&ED tax credits it claimed in each of its 2013 and 2014 taxation years. Impact This decision enables doctors conducting medical or scientific research to apply for and collect some of the more than $3 billion in SR&ED tax credits obtained each year. Ryan’s experienced team of SR&ED professionals helps clients secure these valuable credits through our comprehensive approach and by handling the application and documentation process from beginning to end. This is an important decision for doctors engaged in medical and scientific research, and we look forward to applying it as we continue to serve MPC clients engaged in SR&ED in Canada. Jeffrey Stewart ______________________________________________ |