Verreault – Quebec Court of Appeal finds that a single-person inventor’s proprietorship was a business eligible for investment tax credits

The taxpayer, who had been a science professor at a university from 1970 to 2020, in 2010 started a proprietorship (“RVI”) focused on scientific instrumentation and software design which, among other projects, included designing a new bearing system for go-karts.

RVI generated revenues of nil, $96, and $52,054 for his 2011, 2012, and 2013, taxation years, respectively. Those years were reassessed by the ARQ to deny investment tax credits on the basis that he was not carrying on a business. However, starting in 2017, RVI began generating more significant revenues and turned a profit.

In applying the two-part test in Stewart, Bich JCA found that there was no relevant personal element to his endeavour, stating:

[T]he mere fact that a person undertakes to commercially develop an activity stemming from a personal passion (whether it involves music – as in Bodanis –, computing, video games, or karting, as in this case) … does not, in itself, allow the conclusion that this activity has a recreational aspect. Indeed, many businesses originate from such a passion … which often sustains the entrepreneur's perseverance in the face of the uncertainties of the venture. …

In further finding that the taxpayer’s activity was carried out in a sufficiently commercial manner, Bich JCA stated:

[T]here is nothing surprising about the fact that experimental development activities, which are inherently risky, do not immediately produce marketable results. … The absence of immediate profitability is neither an indication (nor proof) of a lack of reasonable expectation of income or profit. …

The activities of a single person … not producing as much or as quickly as a team of several dozen or hundreds of people is not abnormal and cannot, in itself, cast doubt on the entrepreneurial or commercial spirit of the individual (regardless of their age) nor on the existence of their business (independently of their skills in administration or business development, which is also not a relevant factor).

His appeal was allowed.

Neal Armstrong. Summary of Verreault v. Agence du revenu du Québec, 2026 QCCA 90 under s. 3(a) – business.