What is SR&ED?

SR&ED is short for Scientific Research & Experimental Development and is a tax incentive program administered by the Canadian Revenue Agency (CRA).

The SR&ED program is designed to encourage R&D and create new jobs in Canada.

How do companies benefit from SR&ED?

Cash refunds of up to 64% of salary expenses can be received by Canadian private companies in B.C. doing innovative, experimental or R&D work carried out in Canada.

Refund on Salaried Employees
64%
Refund on Contractors
33%
For example, if your company has 3 employees doing R&D full-time, and each employee earns $50,000 per year:

Without SR&ED:



$150,000 R&D Budget =
Employees

No SR&ED claim filed
0%

$0 Cash Refund

With SR&ED:

$150,000 R&D Budget =
Employees

Successful SR&ED claim filed
64%
$96,000 Cash Refund =

That's almost enough funding to hire 2 more employees!
$150,000 R&D Budget =
Contractors

Successful SR&ED claim filed
33%
$50,000 Cash Refund =
That's enough funding to hire 1 more contractor.
SR&ED benefits are applied to taxes owing or received as a cash refund.

The SR&ED program was set up by the federal government to encourage and reward the growth of innovative companies.

Why? Because innovative companies are more competitive and creating new jobs helps build a stronger economy for Canada.

22,000 Canadian companies receive
year after year.

75% of those are small companies.

There is no upper limit to the total amount given out by the government.
If you qualify, you receive the benefits, even if your company is not profitable yet.

If your company is innovating, you should be applying for SR&ED.

Are there deadlines?

Yes, and acting sooner is always better.

What do I do?

– start tracking the time
spent on R&D
– create or collect records of
your R&D work
– get ready to file

When do I file?

Within 6 months, but
no later than 18 months
after your tax year-end

When do I get my benefits?

2 weeks to 4 months
after your claim is filed

What do I do?

– track and summarize time
spent on R&D
– create or collect records of
your R&D work
– file your claim or
get ready to file

When do I file?

Within 6 months, but
no later than 18 months
after your tax year end

When do I get my benefits?

2 weeks to 4 months
after your claim is filed

What do I do?

– list and summarize time
spent on R&D
– collect available records of
your R&D work
– file your claim

When do I file?

You MUST file within 18 months
of your tax year end

When do I get my benefits?

Up to 8 months
after your claim is filed

You apply for SR&ED after the end of the tax year in which you did any R&D work.

You can apply even if your R&D project is not finished, or your project failed.

You can apply each and every year, if you did R&D work and had qualifying expenses in that year.

The SR&ED program has existed since 1986, however, the Canadian government has funded research activities as far back as 1944.

What is “R&D” work?

Companies overcoming technical obstacles to create innovative new products or improve existing products may qualify for SR&ED refunds.

Identifying what work is R&D and presenting this information to CRA is one of the more challenging aspects of applying for SR&ED.


CRA looks for your answers to 3 key questions:

1 What technological uncertainty were you trying to overcome, and why was it uncertain?

2 What work did you do to overcome this uncertainty, and how did you do this work?

3 What technological advancement did you achieve or try to achieve, and why is it an advancement?

What these questions mean and how to answer them is at the core of how CRA will decide whether your innovative R&D work qualifies for SR&ED benefits.

It is important to get this right.

Although many companies spend a lot of time innovating, not everything they do is R&D.

There can be several layers of activity within a business:
  • Company activities relating to running the company’s strategic or day-to-day business operations;
  • Product development activities including building features and functionality with routine or non-routine work;
  • Technology development including resolving technical problems with known solutions or with R&D;
  • R&D work performed as one or more SR&ED projects within the product or technology development life cycle.
Only those activities that fall within CRA’s definition of an SR&ED project can be claimed.

Research Returns consultants understand CRA’s rules and terminology.
We know how to prepare SR&ED applications in the manner that CRA expects.

We can help you identify whether your work is eligible for SR&ED funding and how much you can claim.


Any questions? Let us know.