The CEWS will reduce the amount of eligible SRED expenses for those companies who do SRED and who collect benefits under the CEWS program, but it may not be a dollar for dollar. So, just how will it work?
If a company is choosing the file using the traditional method, then eligible wages will be reduced by the amount of CEWS benefits pertaining to those wages, and that is pretty straight forward. For example, suppose there is a total payroll of $125,000 and it has been determined that $50,000 of the cost was SRED work. Further suppose that $40,000 has been received under the CEWS program and that a reasonable allocation is to attribute $15,000 of that amount to the eligible SRED wages. SRED wages would now be $35,000, or 70% of the 50k.
If a company is filing under the proxy method, the $50,000 of eligible wages effectively yields $77,500 of SRED expenses (provided the company’s overhead justifies the $27,500 bump-up), and that amount would be reduced by the $15,000 of the CWES benefits allocated to SRED labor, leaving $62,500, or 125% of the 50k.
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