The Scientific Research and Experimental Development (SR&ED) program is Canada's largest tax incentive program for research and development — worth over $4.2 billion annually. 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 $6 million of eligible expenditures
- Other corporations: 15% non-refundable credit
- Individuals and partnerships: 15% credit (40% of unused credit is refundable)
For a typical startup spending $500,000 on eligible R&D, this could mean a refund of up to $175,000 federally — and even more when you factor in provincial credits. Use our SR&ED calculator to estimate your specific refund.
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.
For a deeper dive into rates, deadlines, and the T661 filing process, check out our complete SR&ED guide for 2026. If you're a software company, see our dedicated guide on SR&ED for software companies.
Ready to see how much your company could claim? Check your eligibility or estimate your refund in under 2 minutes.