What is SR&ED?
SR&ED (Scientific Research and Experimental Development) is a federal tax incentive that pays back part of what a Canadian business spends on work that tries to solve technical problems. It is run by the Canada Revenue Agency (CRA) and claimed through your corporate tax return after the work is done.
It is one of the largest sources of government support for business innovation in Canada. Unlike most grants, you do not apply before you start, and there is no competition for a fixed pot of money. If your work qualifies and your claim is well prepared, you can claim it.
Canadian-controlled private corporations can often receive part of the credit as a cash refund, even in a year with no taxable income. BC also has a provincial credit that may be claimed alongside the federal one. The exact amounts depend on your company and change over time, so we work them out with you and your accountant for each claim.
Does my company qualify for SR&ED?
You might qualify if your team tried to solve a technical problem where the answer was not known at the start, and worked through it in a structured way. Company size does not matter. Many small manufacturers qualify for work they think of as everyday problem-solving on the shop floor.
The CRA looks at the work, not the industry or the job titles. Signs that you may have eligible work include:
- You built prototypes or ran trials, and some of them did not work the first time.
- You changed a process to cut cycle time, reduce scrap or make a part that was hard to produce.
- You tested new materials, tooling or fixtures because standard options could not do the job.
- You wrote software to solve a technical problem, not just to configure an existing tool.
- You had to develop new knowledge in-house because suppliers or published sources could not give you the answer.
If any of these sound familiar, it is worth a conversation. The work you are proudest of fixing is often the work that qualifies.
What kind of work counts as SR&ED?
Work counts when it tries to overcome a technical uncertainty through a systematic investigation, and the goal is to advance what your company knows how to do. In practice, the CRA asks a few plain questions about each project:
Was there a technical uncertainty?
At the start, could you say for sure whether you could reach your goal, or how? If a competent person in your field could have solved it with standard knowledge and methods, it is not uncertain. If you had to find out by trying, it may be.
Did you investigate it systematically?
Did you form ideas about what might work, test them, look at the results and adjust? A clear trail of attempts, measurements and changes is what the CRA wants to see. Trial and error counts when it is organized and recorded.
Did you learn something new?
The aim must be to gain technical knowledge, even if the project failed. A failed trial that taught you why a material cracks or why a process drifts can be stronger evidence than a smooth success.
Was the work done by qualified people?
The people doing the work need the skills to carry out the investigation. That can include machinists, technicians and operators, not only people with degrees. What they did and how they did it matters more than their titles.
What doesn’t qualify for SR&ED?
Routine work does not qualify, even if it is hard or expensive. Common examples include:
- Standard design or drafting where the method is already well known
- Quality control testing and routine data collection
- Building a product using established techniques
- Market research, sales and business planning
- Cosmetic changes and style updates
- Production runs after the technical problems have been solved
The line between routine and experimental is often the heart of a claim. Part of our job is to separate the eligible parts of a project from the ordinary parts, and describe each honestly.
What costs can you claim?
You can claim certain costs tied directly to the eligible work. The main groups are:
- Wages for employees who did, supervised or directly supported the experimental work, for the time they spent on it
- Materials that were used up or transformed in the experiments, such as stock that was cut, moulded or scrapped during trials
- Contractors in Canada who carried out part of the eligible work for you
- Overhead, either calculated with a simplified method or tracked in detail
Some costs need special care, such as equipment, work done outside Canada and payments to related companies. Government funding you received for the same work can also reduce what you claim. We sort out these details so your claim is accurate the first time.
What records should you keep?
Keep records that are made while the work happens. The CRA gives more weight to evidence created at the time than to explanations written after the fact. Useful records include:
- Project notes, logbooks or a simple running document of what you tried and why
- Test results, measurements and inspection data
- Drawings, CAD revisions, photos and videos of prototypes and trials
- Emails and messages discussing technical problems
- Time records showing who worked on each project
- Purchase records for materials used in experiments
You do not need a lab notebook system. A shared folder per project, with dated notes and photos, goes a long way. We help clients set up habits that fit how their shop already works.
How does the SR&ED claim process work?
You file the claim with your corporate tax return, using the CRA’s SR&ED form and supporting schedules. Here is how we usually work through it with a client:
- Book a demo. We talk through your projects for the year and tell you plainly whether a claim looks worthwhile.
- Interviews. We meet the people who did the work, on the shop floor where possible, to understand the problems, attempts and results.
- Project descriptions. We write the technical descriptions in the format the CRA expects, in clear language that reflects what really happened.
- Costs. We work with you and your accountant to identify the eligible wages, materials, contractor costs and overhead.
- Filing. The claim goes in with your tax return. We check that every form and schedule lines up.
- Follow-through. If the CRA asks questions or schedules a review, we help you prepare and respond.
Is there a deadline?
Yes. The claim must be filed within a set time after the end of your tax year, and the CRA does not accept late claims. Because the deadline is tied to each tax year, it is easy to lose track of. We map out your dates at the start so nothing slips.
What happens if the CRA reviews my claim?
A review is a normal part of the program, not an accusation. The CRA may ask for more information or send a reviewer to talk with your team and look at your records. Claims that were prepared carefully, with good records made during the work, tend to go smoothly.
If your claim is reviewed, we help you gather the evidence, prepare your team and answer the reviewer’s technical questions.
Common SR&ED mistakes
- Not claiming. Many companies assume their work is too ordinary. Process improvements and failed trials often qualify.
- Claiming everything. Including routine work weakens a claim and invites questions. Be precise.
- Writing about the business, not the technology. Reviewers want the technical problem, what you tried and what you learned.
- Rebuilding records from memory. Thin or after-the-fact evidence is the most common reason claims are reduced.
- Leaving it too late. A rushed claim misses eligible work and makes errors more likely.
What does SR&ED look like in a manufacturing shop?
In manufacturing, eligible work usually shows up as a problem that standard methods could not solve. These examples are typical of the kind of work that may qualify, depending on the details:
- A part that would not hold tolerance. A shop tried different fixturing, toolpaths and cutting strategies to machine a thin-walled part without distortion, measuring each attempt until it found a method that worked.
- A new material. A fabricator switched to a recycled or unfamiliar plastic and had to run trials on cutting, bending and bonding because the supplier’s guidance did not cover the application.
- A process that kept drifting. A moulding line produced inconsistent parts, and the team ran structured tests on temperatures, timing and compound changes to find the cause.
- Automation that did not exist off the shelf. A company built its own jig, sensor setup or control logic because no available product could handle its parts.
- A product that had to pass a new standard. A team redesigned a component and tested prototypes repeatedly to meet a performance or safety requirement.
In each case, the eligible part is the investigation: the uncertainty, the attempts and what was learned. The production work that follows is not.
Can I claim SR&ED and a grant for the same project?
Often, yes, but the two affect each other. Government funding received for the same work, such as some IRAP support, usually reduces the costs you can claim for SR&ED. That does not make combining them a bad idea. It means the claim has to account for the funding correctly. We plan grants and SR&ED together so you get the full benefit of both without errors.
Why work with Unique Consulting on SR&ED?
Our team comes from manufacturing, so we understand your process before we write about it. Our founder has done hands-on experimental development and filed SR&ED claims as an operator, not only as a consultant. That means we can talk with your machinists and technicians in their own terms, spot eligible work they might overlook and describe it accurately.
We also work in English, Punjabi and Hindi, so your team can explain their work in the language they are most comfortable with.
How we help with SR&ED
We find the work that qualifies, write the technical project descriptions and prepare the claim.
How do fees work?
Fees are agreed in writing before any work starts. Book a demo and we will explain how we would charge for your claim.