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The SR&ED Program

The Scientific Research & Experimental Development (SR&ED) is a comprehensive tax incentive program administered by the Canada Revenue Agency (CRA). The SR&ED program aims to reward companies for technological advancements made in Canada and provide incentives to continue technological Research and Development within the country. Since its inception in the mid-1980’s, the SR&ED program has averaged annual returns of $3 billion to businesses for their contributions to technological advancement within Canada. The program’s wide scope means that businesses of all sizes and across many industries can take advantage of the incentive, recovering up to between 25-50% of eligible expenditures.

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The Benefits of Qualifying SR&ED

 

There are many reasons why the SR&ED program could be advantageous for your business. The SR&ED program is specially designed to give your business the added boost it needs to continue achieving success in R&D. The obvious benefit to you is the potential lucrativeness of SR&ED. Every dollar you spend on research and development is eligible for an income tax credit (ITC) which will reduce your income tax – and, in some cases, result in cash refunds that may be injected back into your business. All SR&ED expenditures incurred within the fiscal year are eligible for a full tax reduction – meaning more money stays in your pocket.

 

A few other benefits:

  • The SR&ED program is quite generous in its scope of eligibility. Not only are current expenditures directly related to your R&D endeavours eligible for ITCs, but also overhead costs (such as administrative support) and other related expenses.

  • The expenses you incur now are SR&ED eligible, even if you’re not ready just yet. The format of the SR&ED program allows you to choose when you claim your SR&ED expenditures. If you don’t have sufficient taxable income to take advantage of the program now, you may be able to claim your SR&ED expenditures in the future.

 

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Eligible Expenditures

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The following expenditures are eligible under the SR&ED program:

  • Labour – all wages or salaries of employees who directly contributed to the R&D project

  • Materials – any physical goods required for testing

  • Overhead Costs – the supplemental costs required to support operation of R&D projects (e.g. administrative support, training costs, office supplies, utility costs)

  • Contractors – individuals or companies hired for the specific support of the R&D project (e.g. engineers, testing, etc.)

  • Third Party Payments – any monies paid to approved institutions, such as universities or research institutes in exchange for SR&ED-related information or results

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