7 things you need to know to create a successful SR&ED application.

Claims that are poorly prepared or that are considered by CRA to be high risk may be subject to a lengthy audit and rejection by CRA

Understand CRA’s 18 month deadline.

1A SR&ED application must be sent to CRA within 18 months of a company’s tax year-end. There is no leeway to be late (on this 18-month deadline). Even if you file on time, but a form is missing or important information is missing, your entire application may be disallowed by CRA.

Procrastination or inaccuracy can cause you to lose out on SR&ED benefits.

It is best to send in a SR&ED application within 6 months of a company’s tax year-end, together with the T2 corporate tax return. That’s because CRA has deadlines too. Your application will get looked at sooner and you’ll receive your benefits faster.

View CRA's requirements for filing a SR&ED application

Know how to correctly identify a SR&ED project.

2Hint: it’s usually not the same as the “company project”.

If your company is creating or improving a product, your “company project” will include all the effort of designing, developing and launching that product. Within that effort, you may need to do some R&D, or experimenting. This is the “SR&ED project”, and it is often a subset of the overall “company project”.

Once you run up against a technical obstacle for which you don’t know the solution, everything you do to solve that problem may be SR&ED work.

There may even be several SR&ED projects within a company project.

Some of the types of activities that are often not part of a SR&ED project;
  • market research,
  • business requirements,
  • customer support,
  • design and development that has no obstacles and does not go beyond using known techniques.
Click here for CRA’s policy on what types of activities are SR&ED

Know what is routine and what is R&D.

3It is often difficult to identify where routine development ends and experimental development begins. This can lead to one of two problems;

  1. Your SR&ED application is too low - not including all your qualifying work and expenses leaves money on the table. You’re missing out.
  2. Your SR&ED application is too high - an “aggressive” claim risks attracting negative attention from CRA. This can result in delays or a denial of your entire refund, and flags your company for future possible scrutiny by CRA. Too risky.
This dilemma is especially true for software and IT claims, which are commonly the most contentious of all SR&ED claims audited by CRA.

Know how to write a good project description.

4The project description is a key part of the SR&ED application. There are many ways to write a poor project description. A common misstep is to describe your experimental work as solving problems by “trial and error”. These words in a project description will most likely raise a red flag with CRA, and an audit is sure to follow.

Putting words like “trial and error” in your project description runs the risk of CRA prejudging your project and assuming that you did not have a plan and you were not experimenting. If your work actually did involve “experiment or analysis within the framework of a systematic investigation or search” (to use CRA’s terminology), then your project description should clearly describe that.

View CRA's policies on Work Eligibility

Keep supporting records or documentation.

5Each SR&ED project should have records that document what work was done, by whom, when, for how long, as well as how the work was done. CRA is looking for records that were created at the time the work was done. Documents may be informal, and even handwritten or a drawing, but records of some sort need to exist.

In recent years, CRA has placed increased emphasis on documentation. The best supporting records identify the date and the author, and clearly relate to the work performed.

Your records or documents are not submitted with the SR&ED application, but need to be available should CRA ask to see them. If there are no records of any kind (an extremely unlikely scenario), your SR&ED application runs the risk of being disallowed.

View more on documentation and other evidence to support your SR&ED application

Keep proper time sheets.

6Keeping weekly time sheets recording the time spent by each person doing SR&ED work is a best practice. Being able to show them to CRA, in the event of an audit, is the best way to support salary expenses that you are claiming.

Question: “But we just learned about SR&ED and we haven’t been keeping time sheets. Can we still apply for SR&ED?”

Answer: CRA does not discourage companies from applying for SR&ED, even if they have not yet started keeping proper supporting documentation, especially if the company is applying for SR&ED for the first time.

CRA does not require that a company create weekly time sheets. Other types of records could be produced to support who spent how much time, when, and on what types of activities. However, in the event of an audit by CRA, not having time sheets on hand could lead to a prolonged and contentious audit and will likely delay the processing of your claim.

Having said that, it is simply easier for staff to get in the habit of recording their SR&ED time and activities every week. It takes only minutes each week and will prevent future headaches in case of an audit.

View CRA's documentation on salary and wages expenditures

Understand CRA’s key terms.


A few useful terms;

  • all or substantially all means “90% or more”
  • analysis is “the detailed examination of information to differentiate the various parts of a whole, determine their attributes, or explain their relationships”
  • experiment means “the test of a hypothesis under controlled conditions”
  • hypothesis is “an idea, consistent with known facts, that serves as a starting point for further investigation to prove or disprove that idea”
  • uncertainty (obstacle) means “whether a given result or objective can be achieved or how to achieve it, is not known or determined on the basis of generally available scientific or technological knowledge or experience”
  • systematic investigation or search is “an approach that includes defining a problem, advancing a hypothesis towards resolving that problem, planning and testing the hypothesis by experiment or analysis, and developing logical conclusions based on the results”

CRA has specific meanings for their terms and it's important to understand them as they relate to the SR&ED program. All terms can be found in their glossary.

View CRA's full glossary

As with all matters related to tax, some rules are fairly straightforward, others can be quite complex.
When in doubt, it’s always best to consult a tax professional.
Call us with your questions. We’re happy to help.

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Our goal is to submit quality, eligible claims at the correct amount, so that you can EXPECT and plan for your application to be approved each and every year.