SR&ED Overview
Scientific Research and Experimental Development (SR&ED) is Canada’s largest innovation program supporting research and development (R&D), providing tax credits and refunds totaling more than $3 billion for over 20,000 claimants each year. The mandate of the SR&ED program is to encourage Canadian businesses to innovate, develop scientific and technological knowledge, and create jobs in Canada.
SR&ED is administered by the Canada Revenue Agency (CRA) and governed by the Income Tax Act law, forming a tax credit that is stable and accessible to all Canadian businesses. Unlike other government support programs, SR&ED is not finite and does not limit financial reimbursement. This means that if your projects meet program eligibility, you are entitled to receive the full financial benefit in the form of an investment tax credit (ITC) and/or a cash refund.
Unlike other funding mechanisms that provide funds before a project is started or completed, SR&ED is an entitlement incentive program, whereby expenditures must have been incurred before a SR&ED project may be claimed.
Many companies don’t realize they are eligible for SR&ED, perceiving that R&D is white lab coats, test tubes, and beakers, i.e., scientific research. However, SR&ED is defined by the Income Tax Act and supports a much broader definition than industry’s view of R&D and specifically includes experimental development. In fact, only a small fraction of SR&ED claims includes scientific applied or basic research while 90% of claims would be characterized as experimental development.
Experimental development includes work undertaken using sound engineering approaches to support attempts that generate or discover technological knowledge, capabilities, or know-how to develop or improve materials, devices, products, or processes.
Most SR&ED claims are experimental development, the type of work companies undertake daily, using good engineering approaches to support attempts that generate or discover technological knowledge or know-how to develop or improve materials, devices, products, or processes.
If you have previously or are currently asking yourself, “My company experienced technological challenges, so how can we take advantage of this incredible program?” then you may have experimental development and this SR&ED 101 Guide is right for you.
Through the Ryan SR&ED 101 Guide, we will dive into the details of project(s) eligible for SR&ED by looking at project eligibility, examples of successful projects, stacking funding, tips about the application process, and more.