The Scientific Research and Experimental Development (SR&ED) program is Canada's largest tax incentive program for research and development. Yet, many startups and SMBs leave money on the table simply because they don't understand how it works or believe they don't qualify.
What is SR&ED?
SR&ED (pronounced "shred") is a federal tax incentive program administered by the Canada Revenue Agency (CRA). It's designed to encourage Canadian businesses of all sizes to conduct research and development (R&D) in Canada.
The program provides two types of benefits:
- Investment Tax Credits (ITCs): Refundable or non-refundable tax credits based on your eligible R&D expenditures
- Tax Deductions: Deductions for current and capital expenditures on R&D activities
Who Qualifies for SR&ED?
Contrary to popular belief, SR&ED isn't just for scientists in lab coats. If your company is doing any of the following, you might qualify:
- Developing new products or processes
- Improving existing products or processes
- Solving technical problems through experimentation
- Building prototypes or proof-of-concepts
- Writing software that involves technical uncertainty
The key criteria is technological advancement — you must be attempting to achieve something that cannot be done using standard practices or readily available knowledge.
What Expenses Can You Claim?
SR&ED covers a wide range of expenditures, including:
- Salaries and wages of employees directly engaged in R&D
- Materials consumed during R&D activities
- Contractor payments for R&D work performed in Canada
- Overhead expenses related to R&D activities
How Much Can You Get Back?
The refund amount depends on your company's status:
- Canadian-Controlled Private Corporations (CCPCs): Up to 35% refundable credit on the first $3 million of eligible expenditures
- Other corporations: 15% non-refundable credit
- Individuals and partnerships: 15% refundable credit
For a typical startup spending $500,000 on eligible R&D, this could mean a refund of up to $175,000.
Common Misconceptions
"We're too small to qualify" — Size doesn't matter. Even early-stage startups with a few developers can claim SR&ED.
"We're not doing 'real' R&D" — You don't need a formal research lab. Software development, engineering challenges, and product innovation often qualify.
"The process is too complicated" — While documentation can be complex, modern tools like Glauq automate much of the process, making claims accessible to companies of all sizes.
Getting Started
To maximize your SR&ED claims:
- Track your R&D activities throughout the year
- Document the technical challenges you face
- Keep records of who worked on what
- Consider using an AI-powered tool to identify eligible activities
The SR&ED program exists to help innovative Canadian companies like yours. Don't leave money on the table.
Ready to see how much your company could claim? Book a free consultation with our SR&ED experts.