Scientific Research & Experimental Development (SR&ED)

What is SR&ED?

Understanding SR&ED Funding

Scientific Research & Experimental Development (SR&ED)

The Canadian government’s Scientific Research and Experimental Development (SR&ED) Program is the single largest source of Federal government support for Research and Development (R&D). The program is usually pronounces “shred”. This incentive program is administered by Canada Revenue Agency (CRA) to encourage R&D in Canadian businesses of all sizes and industries. The program provides claimants with cash refunds and / or tax credits based on eligible R&D expenditures performed in Canada.

Most software development and high-technology companies (even manufacturing firms) are engaged in R&D at some level and often do not realize that they qualify for funding. If technological uncertainties are present at the outset of the development project or evolve over time, it is very likely that Experimental Development has occurred.

To maintain leadership in today’s competitive environment Canadian companies must innovate. The Federal and Provincial government recognize this and encourage innovation by refunding your R&D costs through the SR&ED program.

Eligible Work

Eligibility Requirements

Eligible SR&ED is work to achieve a technological advance, through a process of systematic investigation overcoming technological uncertainty, and conducted by appropriately qualified people. The work may be:

  • experimental development, which is defined as work undertaken to achieve a technological advancement for the purpose of creating new or improving existing materials, devices, products, or processes, including incremental improvements. Most claims involve experimental development (this work can be performed by the claimant or on the claimant’s behalf);
  • applied research, which is defined as work undertaken to advance scientific knowledge with a specific practical application in view; or
  • basic research, which is defined as work undertaken to advance scientific knowledge with a specific practical application in view.

In addition, certain work will only qualify if it meets the following conditions:

  • the work has to be commensurate with the needs of the basic or applied research or eligible experimental development; and
  • the work has to directly support the basic or applied research or eligible experimental development.

The work must be:

  • engineering,
  • design,
  • operations research,
  • mathematical analysis,
  • computer programming,
  • data collection,
  • testing, or
  • psychological research.

Eligibility Insights

Five Questions to Help Determine SR&ED Eligibility

  1. Was there a scientific or a technological uncertainty – an uncertainty that could not be removed by standard practice?
  2. Did the effort involve formulating hypotheses specifically aimed at reducing or eliminating that uncertainty?
  3. Were the adopted procedures and activities consistent with the discipline of the scientific method, including formulating, testing, and modifying the hypothesis?
  4. Did the process result in a scientific or a technological advancement? [Note: The project does not have to be a success to be eligible. The focus is on what new scientific/technological knowledge did you gain.]
  5. Was a detailed record of the hypotheses tested and the results kept as the work progressed?