The Scientific Research and Experimental Development (SR&ED) is a federal tax program that helps Canadian businesses of all sizes and sectors conduct research and development within our country. As the largest single source of federal support for industrial research and development, over 18,000 companies have claimed the tax credit each year, totalling over $4 billion investment tax credits.
Of these, about 75% are small businesses.
Who Qualifies for SR&ED?
All Canadian taxpayers who file a T1 or T2 tax return and develop new products, or work to enhance existing products and processes.
As mentioned above, SR&ED can take place in any sector. We have successfully assisted thousands of clients in industries including manufacturing, software & IT, biotechnology, food and beverage, tool and die, oil and gas, machining, mining, and fabrication. There are many different types of work that qualify for SR&ED.
What Qualifies for SR&ED?
- Technological uncertainty – whether a given result or objective can be achieved, or how to achieve it, is unknown or cannot be determined based on generally available scientific or technological knowledge or experience.
- Technological content – there must be evidence that qualified personnel with relevant experience in science, technology, or engineering have conducted a systematic investigation through experiment or analysis.
- Technological advancement – gain in knowledge, the work must generate information that advances understanding of scientific relations or technologies.
Keep in mind the program is offered by the Canadian Government to assist companies engaged in innovation. While these criteria may seem tech and science-heavy, if your company is working to enhance, modify, or improve existing products or processes, you may have work that meets the qualification.
How Much Can I Recover?
Up to 82% of your expenditures, depending on your location within Canada, ownership (Canada vs. Foreign, Private vs. Public), taxable income in the prior fiscal year, and size (amount of capital employed).
Your submission is not capped so there’s no predefined maximum amount a company can claim. As long as the work meets the three SR&ED program criteria outlined above, all expenditures can be submitted.
Qualifying businesses may be eligible to get money back in the form of a refund, reduction in taxes payable, or both. This includes expenditures such as wages / salaries, materials (including wasted and consumed), machinery, equipment, overhead, capital expenditures, third-party payments, and SR&ED contracts.
The SR&ED program aims to encourage experimentation and technological advancement for the benefit of the Canadian economy. If you still aren’t sure your company qualifies, have questions about SR&ED, or you’d like assistance filing, get in touch to request a free consultation.
With 10,000 successful projects approved by the CRA, a success rate of 98%, and more than 1500 different businesses served over the past decade, we have the knowledge depth and experience to provide expert guidance on how the SR&ED program requirements apply to organizations in all sectors.
*The information above is meant for informational purposes only, and not to be used as advice.
You might also be interested in our industry-specific posts regarding SR&ED:
- Agriculture & Agro Foods
- Food and Beverage
- Information Technology
- Life Sciences & Biotechnology