There are two methods of calculating the overhead gross-up on the salary base. This is to compensate for expenditures such as office supplies, heat, electricity, admin staff, and other maintenance expenses.
The traditional method is determining the gross-up through specifically identifying and claiming all overhead and other expenditures, directly attributable to the SR&ED carried on in Canada that were incurred during the year.
The proxy method is an alternative method in computing the gross-up in an approximation of the overhead based on the salary base. This is the most straightforward method however care must be taken to ensure that the claimed proxy doesn’t exceed the actual overhead costs.
While the traditional method can yield a greater rate of return, the use of the traditional method requires quite strict cost accounting and is primarily used for industrial claims where the overhead is easier to determine.
