What Is SRED

How it works

SRED Tax Credits

SR&ED is a well-known acronym that stands for Scientific Research and Experimental Development, and it is a Canadian government tax credit program. Its aim is to provide incentive and support to corporations, startups, SMEs, partnerships and even individuals considering investing in said research. It may not be known, but the Canadian Revenue Authority (CRA) can refund up to 35% of what a CCPC might spend on coders or technology as an investment tax credit (ITC). If you are losing money, you can get this in cash, or as a credit against your taxes. If you are eligible, you can receive a maximum of $3 million of a SR&ED expenditure; anything above that can be claimed at a 15% rate, which is non-refundable and used to offset against future tax.

To understand if you qualify, see the common five SR&ED questions below.


Getting Informed

As with most anything in life, the more informed you are on an issue, the better you can protect yourself. SR&ED is a strict program with a significantly high audit rate. That means the CRA will scrutinize your claim carefully. So, you want to have your ducks in order. A SR&ED claim guide will help, but we are also happy to answer any questions or offer advice in a consultation.
What To Know

Notes on Compensation

SR&ED compensates for systematic investigation or searches in the field of science or technology. Details can be found in the Canadian Income Tax Act subsection 248(1).

Here are some examples of what is SR&ED eligible:

  1. Experimental development to achieve technological advancement for creating or improving materials, devices, processes or products;
  2. Work to create a new type of mask that is cheaper to manufacture and safer for patients;
  3. Applied research to further scientific endeavors and knowledge with practical applications in sight, such as medical research into monoclonal antibodies to improve cancer treatments;
  4. Software, fintech or block chain investments;
  5. Coding or computer programming;
  6. Data collection of physical engineering;
  7. Testing or mathematical analysis.

Areas that people have had a tough challenge making a successful SR&ED claim:

  1. Market research;
  2. Humanities or social sciences research;
  3. Routine data collection;
  4. Sales or prospecting new customers;
  5. Mass manufacturing of a materials.
Make Certain

Questions to Consider

SR&ED compensates for systematic investigation or searches in the field of science or technology. Details can be found in the Canadian Income Tax Act subsection 248(1).

If you are still not sure if you can get a SR&ED tax credit, consider these five questions, all of which need a “yes” answer for you to be approved:

  1. Have you come up against a technological or scientific uncertainty in the course of development?
  2. Did you try out different hypotheses to challenge, minimize or remove that uncertainty?
  3. Was your approach consistent with systematic research and investigation? For example, did you test your hypotheses? Do an assessment or experiment to form a new one?
  4. Was your approach aimed at technological or scientific advancement?
  5. Did you log your progress, the testing details and what results you received?

You will need a detailed account of your activities for the CRA, a determination of all eligible costs and a complete financial calculation. You must always be prepared to explain or defend your claim in the case you get audited.

It takes approximately eight weeks for the CRA to review your documents and determine your eligibility. If they want to look at it in detail or take their time, it could take as long as 24 weeks.