What is Proxy method?
An SR&ED election that calculates qualifying overhead as 55% of qualifying salary, eliminating the need to track individual overhead expenses.
The proxy method is an SR&ED election that simplifies the overhead component of a claim. Instead of tracking which specific overhead expenses (utilities, rent, supplies) were consumed by R&D activities, the claimant elects to calculate qualifying overhead as 55% of qualifying salary.
When to elect proxy
Most SR&ED claimants use the proxy method by default. It's:
- Simpler to administer (no overhead allocation tracking)
- Often produces a higher overhead amount than the traditional method
- The default unless you elect otherwise on Form T661
When traditional method beats proxy
If you have:
- High actual overhead directly attributable to R&D (e.g., a dedicated R&D facility)
- Heavy material costs not paid as salary
- Specialized R&D equipment with significant operating costs
...the traditional (cost-tracked) method may produce a larger overhead claim. Run both calculations on year one to see which is more favourable for your specific cost structure.
What the 55% covers
The 55% proxy is intended to substitute for: utilities, rent, telephone, supplies, and routine overhead consumed by R&D personnel. It does NOT substitute for material costs (those are claimed separately) or contractor costs.
Want to find proxy method-related leaks in your business?
Free 3-minute scan. Pay nothing until we recover money.
Scan My Business — Free →