Typically, in this scenario, the company is also performing/planning to perform their own SR&ED when they engage with the university. So, the answer is yes because the company will claim their own SR&ED work, not the university’s SR&ED work (even though they’re paying for it). The company can include the payment made to the university as an eligible expense because it’s a third-party payment (per sections 2.1 (and 2.1.2) in CRA’s Third-Party Payments Policy). Section 5.0 in this policy provides some more detail:

5.0 Entitlement to exploit the results “To be entitled to exploit the results of the SR&ED, a claimant must have gained the right to use the results of the SR&ED in their business as a direct result of the payment. Whether a claimant is entitled to exploit the results of the SR&ED is a question of fact and will be determined on a case-by-case basis”.

5.1 Two basic situations & 5.1.1 Resulting in a product or patent “If the SR&ED results in a product or patent, then this requirement could be satisfied if the claimant has the right to use a resulting patent (even for a royalty), or where the claimant is entitled to distribute or market any resulting product. If the claimant cannot use the patent or can only obtain the product through normal commercial channels, this requirement would not be satisfied”.

5.1.2 Resulting in a gain of knowledge “If the SR&ED does not result in a product or patent, but results in a gain of knowledge (such as by publication of a scientific paper), then one way this requirement could be satisfied is if the claimant has, as a consequence of the payment, been granted a preferential right to use the results of the SR&ED (the knowledge gained) in its business. A preferential right could be access to unpublished results or early access to results. If results are presented at a conference or published in a journal, this requirement could be met if the sponsor received a pre-publication print of the paper. If the results of the SR&ED are in the public domain before the sponsor receives them, then that would not be considered to be a preferential right”.

5.2 Payer must be entitled “To meet the requirement of being entitled to exploit the results of the SR&ED, it is the claimant making the third-party payment who must be entitled to exploit the results of the SR&ED.”

Section 3.0 of the same policy adds another requirement: “To be considered as a third-party payment, a payment made by the claimant must be for the purposes of SR&ED. The claimant’s obligation is to show that the payments are made for SR&ED. Third-party payments must be made only for SR&ED work.”

Most commonly, our clients meet the requirements in sections 3.0, 5.0, 5.1.2, and 5.2. These terms are typically defined in their agreement with the university/third party. Our clients use the results of the university’s SR&ED towards their own SR&ED work. Our client can make an SR&ED claim for their own SR&ED work (separate IP), not the third-party’s work. Our client includes the third-party payment in their SR&ED expenses.

Aside:
If the third party wants to make an SR&ED claim, they will describe their own work in their claim. No double-dipping of ITCs as per CRA’s Assistance and Contract Payments Policy. Section 4.3.2: “Qualified SR&ED expenditures are reduced by any assistance and contract payments that can reasonably be considered to be in respect of the SR&ED.” and 5.1 “Where a Canadian claimant contracts to have SR&ED carried out on its behalf by another party, the amount payable under the contract may be a qualified SR&ED expenditure for investment tax credit (ITC) purposes […] For the Canadian party performing the contract (the contractor), the contract payment reduces the qualified SR&ED expenditures for ITC purposes. In this way duplication of the ITC is avoided.“

When our client owns the IP (or some of the IP) of the contracted SR&ED work, it becomes a contract expenditure.

Sections 10.0-10.1.3 of CRA’s Third-Party Payments Policy talks about the differences between third-party payments and contract expenditures. From discussions with reviewers, they use these criteria, in addition to 5.0-5.2 above, and focus a lot on 10.1.2 to help figure out the difference and who owns the IP of the SR&ED work:

10.1.2 Rights “In a contract situation, SR&ED services are performed for a payer who receives the rights to the SR&ED. The entitlement to the SR&ED tax incentive occurs at the time the SR&ED is performed. In comparison, a third-party payment situation gives the payer entitlement only to the results of the SR&ED.“