How to allocate founder time to SR&ED

Founders rarely separate technical work from the rest of the day. The same person may run an experiment in the morning, review sales forecasts at lunch, and speak with investors in the afternoon. For an SR&ED claim, the company needs a reasonable way to isolate the time tied to eligible work.

The allocation should reflect documented activity, regardless of whether the founder built the product or kept perfect timesheets. Start with the activities, connect them to the eligible investigation, and use records that let another reviewer test the allocation.

At a glance, September 20, 2026

• Hands-on experimental work and direct technical supervision may support a salary claim.
• Fundraising, sales, general administration, and ordinary product work need to be separated.
• A founder who is a specified employee is subject to separate salary rules under the Income Tax Act.
• The method should be reasonable for the records the company actually kept.

Start with the work, not the founder's title

"Founder," "CEO," and "CTO" describe responsibility. They do not show what the person did during a particular week.

Consider a hypothetical founder of a software company. The team is investigating a synchronization problem that established techniques have not resolved. The founder designs an experiment, reviews failure traces, and changes the next test based on the results. Those activities may be directly engaged in the investigation.

The same founder also prepares a board update, interviews a salesperson, and negotiates a financing round. Those tasks may be important to the business, but importance to the company does not make them SR&ED work.

The CRA's salary or wages policy looks at the duties performed and the connection between the salary amount and the SR&ED work. It also says that claimants need an appropriate method when labour is split between SR&ED and other activities.

What founder work may belong in the allocation?

Work deserves review when the founder directly undertakes, supervises, or supports the eligible investigation. In practice, that might include:

• formulating or refining a technical hypothesis;
• designing an experiment or prototype used to test it;
• reviewing experimental results and deciding what to test next;
• providing direct technical supervision while the investigation is running.

The connection should be specific. "Technical leadership" is too broad. A better record explains which investigation the founder worked on, what they did, and what dated evidence supports it.

General management needs separate treatment. The CRA policy identifies non-technological planning, direction, control, coordination, and similar managerial functions as non-SR&ED work for this purpose. A founder can move between technical and managerial roles several times in one day, which is why job title alone is a poor allocation method.

Build the percentage from evidence

There is no single required allocation method for every claimant. The method needs to fit the company's working records and produce a result that can be checked.

For a founder working across several projects, a review might begin with the project's experiment log, issue history, design notes, code or laboratory records, meeting notes, and calendar. Group the founder's activities into eligible experimental work, routine technical work, and business activity. Then compare the result with payroll and the period covered by the claim.

Suppose the records for one month show repeated participation in three experimental cycles, plus several days spent on financing and customer work. A reasonable allocation should reflect both sides. It should not treat every hour inside the product repository as eligible, and it should not discard the technical work merely because the company lacked a dedicated R&D department.

Timesheets are useful, but a claim does not stand or fall on one record type. The strongest reconstruction usually combines ordinary business records created near the time of the work. Whatever method is used, keep the inputs and the reasoning instead of saving only the final percentage.

Watch the specified-employee rules

Many founders and owner-managers are specified employees because of their share ownership or a non-arm's-length relationship with a significant shareholder. The definition belongs in subsection 248(1) of the Income Tax Act; the facts of the ownership structure still need review.

The Act applies separate limits to specified-employee salary or wages. Subsections 37(9) to 37(9.4) exclude bonuses or profit-based remuneration and cap the salary amount by a formula tied to five times the applicable Year's Maximum Pensionable Earnings, prorated for the relevant days.

This article does not state a dollar cap because the applicable YMPE and taxation-year facts matter. If the same specified employee works for associated corporations, the corporations may also need Form T1174 to allocate the permitted amount.

The labour-allocation percentage and the statutory salary limit answer different questions. First determine the portion connected to eligible work. Then apply the financial rules to the resulting salary amount.

Make the review trail understandable

A useful founder-time worksheet should show:

• the claim period and the founder's total salary or wages;
• the eligible projects and the activities attributed to each one;
• the records used to reconstruct time;
• the excluded business and routine technical activities;
• the calculation, reviewer, and date of review;
• specified-employee status and any associated-corporation analysis.

Keep links to the underlying evidence. A spreadsheet that says "35% SR&ED" without its source trail leaves the reviewer to reverse-engineer the answer.

It also helps to compare the allocation with the technical narrative. If the claim says the founder participated in two short experiments, a near-full-time salary allocation needs explanation. If the experiment log shows sustained hands-on work but the allocation omits the founder entirely, that inconsistency deserves a second look.

The eventual credit calculation is separate from this evidence exercise. The worked SR&ED claim-value example can help orient the financial review, but the inputs still depend on the claimant's actual facts.

Frequently asked questions

Can a founder's management time qualify for SR&ED?

General business management does not become SR&ED because it supports an innovative company. Direct technical supervision of an eligible investigation may require a different analysis, so describe the activity rather than relying on the management title.

What if the founder has no timesheets?

Use the best contemporaneous records available and document a reasonable reconstruction method. Project issues, experiment notes, code history, laboratory records, calendars, and meeting notes may help corroborate the allocation.

Is all technical founder time eligible?

No. Routine development, implementation using established techniques, maintenance, and commercial production can remain outside the eligible investigation even when the founder performs the work.

Does the specified-employee cap replace the time allocation?

No. The allocation determines how much salary relates to eligible work. The statutory specified-employee rules may then limit the amount that can be included.

Sources reviewed September 20, 2026.