Unlocking SR&ED Tax Credits for Medical Professional Corporations (MPCs)

  • By Nicole Mirabal
    • Mar 06, 2024
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Medical Professional Corporations

Are you a Medical Professional Corporations (MPCs) hoping to qualify for Scientific Research and Experimental Development (SR&ED) tax credits? Here’s what you need to know before applying:

What is considered part of the Medical Professional Corporations (MPCs) in the eyes of the CRA & SR&ED?

Often, professionals within MPCs engage in research activities either under contract with external entities or through self-directed initiatives aimed at enhancing service delivery and industry comprehension.

For instance, medical practitioners within MPCs may undertake research endeavors to expand knowledge in specialized medical domains or collaborate with peers and institutions to pioneer advancements in healthcare practices. Similarly, engineers operating within MPCs may develop innovative models to predict phenomena pertinent to their engineering disciplines. These endeavors underscore the pivotal role of MPCs in driving innovation within their sectors.

medical professional corporations

Navigating SR&ED Claims for MPCs: Key Considerations

While the potential for SR&ED claims by Medical Professional Corporations is significant, certain challenges and considerations warrant attention:

  • Funding Sources: The Canadian Revenue Agency (CRA) scrutinizes MPCs’ SR&ED claims concerning alternate funding plans (AFPs) or other monetary streams directly attributed to research activities. Clarifying the utilization of these funds before SR&ED pursuits is essential, with clinical billings often exempt from assessment under this criterion.
  • Individual versus Corporate Engagement: Distinguishing between SR&ED activities conducted by physicians either as individuals or on behalf of their MPCs remains a focal point. Despite the CRA’s efforts to provide guidance through a 2019 directive, ambiguity persists, particularly given the multifaceted roles assumed by physician-MPC owners. The challenge lies in aligning individual roles with corporate objectives, compounded by the sole proprietorship structure often characteristic of MPCs.

MPC SR&ED Case Study:

Legal precedents, such as the landmark case of Andre Lamy MPC v. The Queen, shed light on the nuances of SR&ED claims for MPCs. In this instance, Dr. Lamy, a cardiologist, sought SR&ED credits through his MPC for the 2013 and 2014 taxation years. Despite initial challenges from the CRA regarding the nature of Dr. Lamy’s research engagement, the Tax Court of Canada affirmed the legitimacy of the MPC’s SR&ED claim. The ruling underscored Dr. Lamy’s research activities as integral to his MPC’s operations, reinforcing the interconnectedness of individual contributions with corporate objectives.

Simplifying SR&ED Claims for MPCs

MPCs, alongside other regulated professional corporations like engineering firms, play a crucial role in advancing research and innovation within their respective fields. However, navigating SR&ED guidelines for MPCs can be intricate, especially concerning the roles and operational dynamics within these corporations.

As MPCs navigate the complex terrain of SR&ED claims, clarity and strategic guidance and collaboration with seasoned SR&ED consultants is paramount. Contact us now to learn how we can assist you with the SR&ED claim process for your MPC, while leveraging other funding initiatives!

Sources:

  1. https://www.mentorworks.ca/blog/business-strategy/can-medical-professional-corporations-mpcs-claim-sred-tax-credits/

Author

Nicole Mirabal
Nicole Mirabal

Brand Content Specialist

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