SR&ED 101: Your Complete Guide
Everything you need to know about Canada’s Scientific Research and Experimental Development tax incentive program
10 Essential SR&ED Facts
Master these fundamentals to unlock your SR&ED potential
Part of Your Tax Return
Your application for SR&ED funding is part of your corporate tax return. It’s not a separate application process.
File Early, Get Paid Faster
Filing your SR&ED claim with your corporate tax return (within 6 months of fiscal year-end) cuts processing time by 50%.)
CRA Administered
Canada’s SR&ED program is administered by the Canada Revenue Agency (CRA), not a separate innovation agency.
Evidence is Key
The biggest reason for claim denial is insufficient or inappropriate evidence – not ineligibility. Most businesses qualify!
Real Cash Refunds
Yes, you can receive an actual cheque from the government! Alternatively, you may receive non-refundable tax credits to offset taxes owed.
Document As You Go
The CRA wants contemporaneous documentation (as activities occur). Don’t worry if you haven’t – we can help reconstruct records.
Review Process Insights
Some claims are randomly selected for review after passing the initial scan. Others are flagged for in-depth review due to red flags.
Pro tip: Less is more with the CRA. Providing excessive information can create unnecessary red tape. We help you provide exactly what’s needed – nothing more, nothing less.
What Qualifies for SR&ED?
Understanding eligibility is the first step to a successful claim
Eligible Activities
Experimental development to achieve technological advancement
Applied research to advance scientific knowledge with a specific practical application in view
Basic research to advance scientific knowledge without a specific practical application
Support work that directly supports and is commensurate with the needs of the eligible work
Key Criteria
Technological Uncertainty
The solution cannot be determined by standard practice or existing knowledge
Technological Advancement
Your work must aim to achieve an advancement in technology
Systematic Investigation
A systematic approach through experimentation or analysis
Eligible SR&ED Expenses
Know what costs you can claim to maximize your refund
| Expense Category | Description |
|---|---|
| Labour | Salaries and wages of employees directly engaged in SR&ED |
| Materials | Materials consumed or transformed in SR&ED activities |
| Subcontractors | 80% of amounts paid to arm’s length subcontractors |
| Overhead | Proxy amount (55% of salaries) or traditional method |
| Capital | Equipment used primarily for SR&ED (special rules apply) |
Important Note on Tax Credits
The SR&ED program offers two types of tax credits:
Refundable credits: For eligible CCPCs, up to 35% federal + provincial rates
Non-refundable credits: 15% federal rate that can offset taxes payable
SR&ED Resources
Everything you need to get started with SR&ED
Technical Documentation
- Project objectives & hypotheses
- Experimental methods & results
- Technical challenges faced
- Advancement achieved
Time Tracking
- Employee timesheets
- Project allocation records
- SR&ED vs routine work split
- Contemporaneous logs
Financial Records
- Invoices & receipts
- Payroll records
- Subcontractor agreements
- Material purchases
Common SR&ED Mistakes to Avoid
Learn from others’ errors to ensure your claim succeeds
Waiting Too Long
You have 18 months after your fiscal year-end to file. Missing this deadline means losing your credits forever.
Poor Documentation
Reconstructing documentation after the fact is difficult and less credible. Document as you go!
Claiming Routine Work
Standard engineering, routine testing, and commercial production don’t qualify. Focus on experimental development.
Overstating Claims
Aggressive claims trigger audits. Be accurate and conservative in your estimates.
Proven Results
See how Canadian businesses like yours have unlocked significant SR&ED funding
Clean Energy
How Engineva Sparked $410,000 in Refunds for a Battery Recycling Start-up
Li-Cycle, a Toronto-based start-up was on a mission to solve the end-of-life lithium-ion battery disposal problem. The management team knew that their pioneering hydrometallurgy process might qualify for research funding.
Amount Reclaimed
$410,000
Software/SaaS
Tech Startup Boosts Growth with $70K Refund
Startup struggling with cash flow and R&D costs. Engineva identified eligible projects and filed compliant claims.
Amount Reclaimed
$70,000
Manufacturing
Manufacturing firm recovered $120,000
Complex R&D coupled with product testing raised audit concerns. We prepared a defensible SR&ED claim and managed the CRA review to a positive outcome.
Amount Reclaimed
$120,000
Legal Tech
Advancing Legal Tech Innovation: Securing $50,000 in Mitacs Funding for InheritChain
InheritChain, a dynamic startup at the intersection of Blockchain, Cloud services, and Legal tech, offers innovative SaaS solutions tailored for legal practices.
Amount Reclaimed
$50,000
Blockchain
Breaking Down the Blockchain for Big Tax Savings: $400K+ for SoLVBL Solutions
SoLVBL Solutions Inc., a soon-to-be publicly traded software company providing blockchain solutions, needed a SR&ED team that could help them adhere to all regulatory and financial reporting standards.
Amount Reclaimed
$400,000
Software/SaaS
Expanding Global Horizons: Securing $40K+ CanExport Funding for Eigenuity’s International Growth
Eigenuity Inc., a software company known for its popular voice-over/dubbing app, enables users to create engaging social media clips through easy dubbing features.
Amount Reclaimed
$40,000
SR&ED Program FAQs
How much can I claim through SR&ED?
The amount varies based on your company type and province. CCPCs can receive up to 35% federal credits (refundable on first $3M of expenses) plus provincial credits ranging from 3.5% to 30%. Large corporations receive 15% non-refundable federal credits.
What if I received government grants?
Government assistance and grants reduce your eligible SR&ED expenditures. However, you can still claim SR&ED on the portion of expenses not covered by grants. Proper allocation is crucial.
Can software development qualify?
What happens during a CRA review?
A CRA scientific advisor will review your technical documentation and may conduct a site visit. They’ll assess whether your work meets SR&ED criteria. Having proper documentation and expert representation significantly improves your chances of a successful review.
What qualifies as SR&ED?
Not necessarily! While contemporaneous documentation is ideal, we can help reconstruct records using emails, project files, version control systems, and other available evidence. You can claim for the current year and up to 18 months after your fiscal year-end.
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