SR&ED explained: Canada’s research and development tax incentive
What the Scientific Research and Experimental Development program covers, how a claim works, and the deadline that catches companies out.
The Scientific Research and Experimental Development (SR&ED) program is a federal tax incentive run by the Canada Revenue Agency. It is not a grant you apply for in an intake. You claim it with your tax return for work you have already done.
What work can qualify
The CRA looks for systematic investigation or search, carried out by experiment or analysis, to resolve a scientific or technological uncertainty. In plain terms: you tried to achieve something where the answer was not known or available to a competent professional in the field, you formed hypotheses, tested them and recorded what happened. Routine engineering, quality control, market research and style changes do not qualify on their own.
The CRA groups eligible work as basic research, applied research and experimental development, plus some support work (such as engineering, programming or data collection) when it directly supports that work.
What it pays for
Claims are based on eligible expenditures such as salaries of people doing the work, materials consumed or transformed, and a portion of contract payments. Qualifying Canadian-controlled private corporations can earn an enhanced, refundable investment tax credit up to an annual expenditure limit; other claimants generally earn a non-refundable credit. Rates and limits are set in legislation and have changed over time, so check the CRA's current figures before you plan around a number. Most provinces also offer their own R&D credits on top.
How a claim works
- Keep contemporaneous records as you work: plans, test results, timesheets and notes on what failed.
- File Form T661 (and the related schedules) with your corporate income tax return.
- The CRA may review the claim, including a technical review of the work itself.
The deadline that catches people
For corporations, the CRA's reporting deadline is generally 18 months after the end of the tax year in which the expenditure was incurred. Miss it and the claim for that year is lost. Put it in your calendar now.
The CRA offers free help, including a pre-claim consultation, and you do not need a consultant to file. If you do hire one, understand the fee basis before you sign.