A SR&ED EXAMPLE:

Adopting Innovative Technology

Let’s look at an example of a technology adoption project in the field of carbon capture technology to see what qualifies for SR&ED. This will help us distinguish projects that may be innovative and R&D intensive from those aspects of the project that are SR&ED eligible.

Let’s say that a company has an objective to reduce emissions for its carbon footprint. They might choose to do so by buying and adopting new CO2 sequestration processing technologies. While this may be an innovative technology, this will not automatically qualify as SR&ED. This is because SR&ED is not about the use or adoption of a technology per se but rather the process and pain incurred in the development of that technology. The commissioning phase of the project may require significant development work by the company’s engineers to implement. While this is complex and significant work, this may or may not be SR&ED yet. If the engineering approach and methods employed are well known or available in the public domain, it is not SR&ED.

“SR&ED is not about what one does ‘with’ the technology but rather what you do ‘TO’ the technology that creates the SR&ED opportunity.”

– David Douglas

Principal, SR&ED,

Ryan Canada

Now, let’s say the introduction of the new CO2 sequestration system required experimental modifications and iterations to the equipment to solve a problem, then the project may qualify as SR&ED. Maybe the business doesn’t know how such technology will interact with their equipment and processes. This may force them into an experimental mode to understand more about the interaction variables and make necessary modifications and adjustments to the design to achieve their objectives.

The project falls in line with the three main SR&ED criteria as follows:

  1. Technological Advancement (box 246 of T661);
  2. Technological Uncertainty (box 242 of T661); and
  3. Work Undertaken Systematically (box 244 of T661).

In summary, this example demonstrates the following:

  • Simply adopting new innovative technology does not qualify as SR&ED; however,
  • Developing new processes or undergoing experimental modifications around the new technology may qualify as SR&ED.