SR&ED eligibility
Understand the current CRA requirements and where routine engineering falls outside the program.
A commercially innovative product can come from routine technical work. A failed internal project can still produce a technological advancement. SR&ED eligibility turns on the work itself, not the business outcome.
The CRA currently states two requirements. This guide shows how uncertainty, hypotheses, experiments and conclusions fit inside them without reducing the analysis to a slogan.
Begin with the two requirements
The CRA currently states two requirements: the work must be conducted in Canada for scientific or technological advancement, and it must be a systematic investigation or search carried out in science or technology by experiment or analysis.
- Advancement: the work was conducted to generate or discover scientific or technological knowledge. A commercial improvement on its own is not enough.
- Uncertainty: the knowledge base available at the start was insufficient to determine whether or how the result could be achieved. That is why new knowledge was needed.
- Systematic investigation: the work defined a problem, advanced a hypothesis, tested it by experiment or analysis, and developed logical conclusions from the results.
Read the project as a reviewer would
Explain why the available knowledge could not resolve the problem, which hypotheses the team tested, what the work showed and what knowledge it sought or gained. Those points map closely to lines 242, 244 and 246 of Form T661. Clear writing helps a reviewer understand the facts; it cannot change the eligibility of the work.
Valuable work can still sit outside SR&ED
The CRA excludes several activities. Common examples include:
- Routine engineering or development using established techniques.
- Style, cosmetic or purely commercial changes to a product.
- Market research, sales promotion and business planning.
- Quality control and routine testing of materials or products.
- Routine data collection and commercial production.
- Debugging that doesn't involve technological uncertainty.
The industry does not decide the answer
Software, manufacturing and food-science work can qualify when the facts meet both CRA requirements. The industry label does not decide eligibility; the purpose of the work, the knowledge gap and the way the investigation was carried out do.
A failed hypothesis can still add knowledge
A failed hypothesis can still generate technological or scientific knowledge. The CRA notes that learning why a possible solution will not work may constitute an advancement. The rest of the eligibility requirements still have to be met.
Frequently asked questions
It can. Failure does not disqualify the work, and rejecting a hypothesis may produce new knowledge. The work must still meet the CRA's advancement and systematic-investigation requirements.
No, not on that basis. Applying known frameworks and patterns is routine. Review any separate investigation against the advancement and systematic-investigation requirements.
When SR&ED is performed on a claimant's behalf under an eligible contract, 80% of the allowable contract expenditure may be treated as a qualified expenditure for investment tax credit purposes.
No. What matters is that competent people followed a systematic, experimental approach to resolve technological uncertainty, not their credentials.
With contemporaneous evidence: planning notes, design docs, test results, source-control history and time records. See the documentation guide.
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This guide is general information, not tax advice. SR&ED rules, rates and limits change, so confirm the current figures with the CRA or your advisor before you file.