A Comprehensive Guide to the Canadian SR&ED Program

Key Takeaways

• SR&ED is Canada’s largest federal R&D tax incentive, supporting more than, 24160 businesses a year.
• Under Bill C-15 (royal assent March 26, 2026), the enhanced refundable expenditure limit is now $6 million per year, up from $3 million.
• Capital expenditures are SR&ED-eligible again for property acquired after December 15, 2024, a major change from the post-2014 rules.
• Technical eligibility turns on advancement, uncertainty, and systematic investigation. The credit is calculated separately on eligible SR&ED spend.
• Form T661 is the core filing document; the deadline is 18 months after your corporation’s tax year end, with no extensions.
• Documentation must be contemporaneous, created during the R&D, not reconstructed after the fact.

The SR&ED program is Canada’s largest federal R&D tax incentive. Administered by the Canada Revenue Agency, it provides investment tax credits to corporations, partnerships, individuals, and trusts that carry out qualifying R&D activities in Canada. For 2026, the program became materially more generous: Bill C-15 received Royal Assent on March 26, 2026, doubled the enhanced expenditure limit to $6 million, restored eligibility for certain capital expenditures, and expanded access to the enhanced 35% refundable rate for eligible Canadian public corporations.

What is SR&ED, who is eligible under the new rules, what constitutes a qualifying activity, what expenditures are eligible, how to prepare and file the claim, and common mistakes in our practice. The content is geared toward the Canadian corporation, which is most likely to benefit from the program, but in some limited situations, partnerships and unincorporated individuals can participate.

What Changed Under Bill C-15

Bill C-15, the Budget 2025 Implementation Act, received royal assent on March 26, 2026. The changes apply to tax years starting on or after December 16, 2024. Five of them matter most for anyone planning a claim:

1. Expenditure limit doubled to $6 million: The new 35% credit has been raised to cover the first $6 million of expenditures per year, from $3 million. The amount of the maximum annual refundable benefit in a qualifying CCPC increases from about $1.05 million to about $2.1 million.

2. Phase-out thresholds raised: The taxable range of the capital phase-out increased from $10M–$50M to $15M–$75M. Previously pushed out of the enhanced rate, mid-sized CCPCs remain in the enhanced rate.

3. Enhanced credit extended to Canadian public corporations: Listed Canadian companies, previously limited to the basic 15% non-refundable credit, can now access the 35% refundable rate, with an expenditure limit calculated on a gross-revenue scale ($15M full benefit to $75M phase-out).

4. Capital expenditures are eligible again: Equipment and lab apparatus and other capital property were not included from 2014 until present. Bill C-15 will also restore capital property acquired after December 15, 2024, and lease costs after that date back into the claim. Mainly for R&D projects involving hardware-intensive applications, AI and ML (GPUs now count), biotech and cleantech.

The rest of this guide reflects the post-Bill C-15 framework. If your tax year started before December 16, 2024, the old rules still apply to that year, your accountant should confirm which set of rules governs your specific claim.

What Makes a Project Eligible for SR&ED

The CRA applies three tests to every claim. A project has to meet all three.

1. Scientific or Technological Advancement

The work must aim to push knowledge or technological capability beyond what is currently available. This isn’t the same as commercial novelty, a new product can be commercially exciting without involving any scientific advancement, and a technical improvement nobody else will ever see can still qualify. The advancement is what was learned or built, not what was sold.

2. Technological Uncertainty

When the work started, there had to be a genuine technical challenge that couldn’t be resolved using standard practice or existing public knowledge. If the answer was already known to someone with reasonable expertise in the field, the project isn’t SR&ED. The bar is “not currently knowable through routine engineering,” not “we didn’t know how to do it yet.”

3. Systematic Investigation

There is a process that has to be followed here and involves formulating a hypothesis, creating experiments to test it, collect results, and draw conclusions from them. Random experimentation will not work. Documented iteration with a hypothesis and a test does.

The three tests apply equally to a robotics startup, a financial software company, a craft brewery experimenting with new fermentation chemistry, and a manufacturer developing a coating process. Industry is not the gating factor. The shape of the work is.

What Counts as a Qualifying Activity

The CRA recognises four categories of qualifying work:

• Basic Research: Work done to advance scientific knowledge without a specific practical application in mind. Most basic research happens at universities and research institutes; it’s the least common category for corporate claims.
• Applied Research: Work done to advance scientific knowledge with a specific practical application in mind. A pharmaceutical company researching the properties of a candidate molecule for an eventual drug is doing applied research.
• Experimental Development: The largest category for corporate claimants. It covers work done to achieve technological advancement, creating new or improving existing materials, devices, products, or processes. Most tech, manufacturing, and biotech SR&ED claims sit here.
• Support Work: Permitted where it is directly related to the core SR&ED activity. This encompasses engineering, design, operations research, mathematical analysis, computer programming, data collecting and testing. “Psychological research” is also on the CRA’s list, for example, studies in cognitive science and human factors research which are more prevalent than one might imagine (UX studies of novel interfaces, ergonomic research of medical devices).

Innovative companies have activities outside the categories listed above, including market research, sales promotion, advertising, commercial production, quality control, routine testing, and style changes, but none of these comes into the category unless the company is generally innovative.

Who Can Submit an SR&ED Tax Credit Claim?

SR&ED is available to any Canadian business involved in any type of eligible R&D project, regardless of their size or industry. The amount of the reward and whether or not you will receive cash back depends on the structure:

Canadian-Controlled Private Corporations (CCPCs)

CCPCs are the largest beneficiaries of the SR&ED program. Companies below the taxable capital phase-out threshold qualify for the enhanced 35% refundable credit on the first $6 million of eligible SR&ED expenditures per year under the new Bill C-15 rules. For many startups and growing technology companies, this refund becomes a major source of non-dilutive funding.

Eligible Canadian Public Corporations (ECPCs)

Bill C-15 now allows certain Eligible Canadian Public Corporations (ECPCs) to access the enhanced refundable SR&ED rate for the first time. Eligibility is determined using a three-year average gross revenue test, with the refundable expenditure limit gradually phased out as revenue increases.

Other Corporations

Any large CCPCs whose capital expenditure is above the threshold which will be taxable, a foreign controlled corporation and most public corporations will qualify only for the non-refundable SR&ED credit. The credit will not provide a refund of cash, but any unused portion of the credit will be available up to 20 years later to reduce the amount of tax payable in that year.

Partnerships and Individuals

Partnerships and individuals can still claim SR&ED credits, but the structure is different. Credits are generally allocated to individual partners and are typically non-refundable. For businesses conducting significant R&D activity, incorporating before claiming often produces a better tax outcome, although timing and corporate structure should be reviewed carefully with a tax advisor.

Industries Where SR&ED Claims Are Common

SR&ED is not industry specific but a few industries do claim most of the SR&ED as the nature of work is inherently technological and investigatory. The most frequently used in our practice:

• Software, AI, and Tech: Most modern software companies that do genuine engineering, not just integration, have eligible work. Backend architecture, ML model development, real-time systems, and novel algorithms are common claim territory. The new capital-expenditure eligibility under Bill C-15 makes GPU and compute infrastructure claimable for the first time since 2014. See our work with tech companies.
• Manufacturing: Process improvement, materials engineering, automation work, and product-development cycles that resolve real technical questions all qualify.
• Biotechnology and Pharmaceuticals: From early-stage research through clinical-development support work, the sector is one of the largest SR&ED claimants in Canada.
• Cleantech and Energy: Environmental technology, energy storage, emissions reduction, and sustainable materials development.
• Agriculture and Agri-food: Crop science, sustainable practice development, food-science work, processing innovation.
• Financial Technology: Algorithmic work, fraud detection, risk modelling, and core payments infrastructure.
• eCommerce Platforms: Custom platform engineering, fulfilment optimisation, and recommendation systems. 
• Medical Devices and Digital Health. Device engineering, regulatory-driven development work, novel diagnostic approaches.

The pattern across all of these: the work has to resolve a technological question that wasn’t already answered. Companies doing routine implementation in any of these sectors don’t qualify just because the industry is “innovative.” The work itself has to be.

What Expenditures Can You Claim

The main categories of eligible SR&ED expenditures:

• Salaries and wages of employees directly engaged in SR&ED, plus a portion of supporting staff time.
• Materials consumed or transformed in the R&D.
• Contractor and subcontractor payments for SR&ED work performed in Canada (foreign contractors are limited).
• Third-party payments to qualifying universities and approved research institutions.
• Capital expenditures (new under Bill C-15); equipment, GPUs, lab apparatus, and other capital property acquired after December 15, 2024.
• Overhead is either itemised under the traditional method or claimed as 55% of SR&ED salaries under the proxy method.

Traditional Method vs. Proxy Method

Two ways to handle overhead. The traditional method requires you to itemise actual overhead and supporting expenditures; more documentation, but it produces a higher credit if your overhead is substantial. The proxy method lets you claim 55% of employees’ salaries and wages directly engaged in SR&ED, in lieu of itemised overhead. Most companies use the proxy method because it’s simpler, but we model both for any first-time claim. The right answer depends on the company’s cost structure.

The SR&ED Claim Process

The claim runs in parallel with your corporation’s annual tax return. The main steps:

1. Identify the projects during the year: Tag SR&ED work as it happens, not in arrears. Keep contemporaneous documentation (engineering notes, commit histories, time logs, project records). Reconstruction after the fact is the single biggest reason claims fall apart under CRA review.

2. Prepare the claim: Complete Form T661 (the core SR&ED form), Schedule T2SCH31 (Investment Tax Credit — Corporations), and any provincial schedules. Build the technical narrative for each project. Reconcile salaries, materials, contractors, and capital costs.

3. File with your corporate tax return: The claim is filed as part of the T2. The deadline is 18 months after your corporation’s tax year-end. The CRA does not grant extensions on this; miss it, and the claim is permanently lost.

4. Respond to CRA review if selected: The CRA reviews a meaningful percentage of refundable claims. Be ready to support the technical narrative and the expenditure detail.

Preparing the Claim

Three things separate a strong claim from a fragile one:

Step 1: Contemporaneous Documentation

Records created during the R&D, not reconstructed afterward. Engineering notebooks, version-control commit histories, time-tracking entries, project management notes, lab books, design specifications. The CRA’s published position is unambiguous: contemporaneous records carry weight, retrospective ones don’t. If your team works without documentation, building a discipline into the workflow is worth more than any single filing improvement.

Step 2: Clean Expenditure Tracking

Every dollar in the claim needs to be tied to a specific project, a specific person or vendor, and a specific date. Time-tracking by project for engineering staff is non-negotiable for any meaningful claim. Material consumption and contractor invoices need the same project-level allocation.

Step 3: Technical Narratives that Pass the Three Tests

Each project narrative on Form T661 has to demonstrate scientific or technological advancement, technological uncertainty, and systematic investigation. The narrative is what the CRA reviewer reads first. A clear, honest narrative that names the specific uncertainty and what was tried is worth more than a long, vague one.

Tools to Simplify SR&ED Claim Preparation

Most SR&ED claim preparation runs out of three categories of tools you likely already have:

• Time-tracking systems that can tag hours by project; Harvest, Toggl, Clockify, or the built-in tracking in tools like Linear, Jira, or Asana
• Version control and project management with searchable history,  Git commit logs and issue trackers double as contemporaneous documentation when the entries are descriptive
• Engineering and lab documentation including Notion, Confluence, GitBook, or simple shared drives, used consistently

For an estimate of what your company could claim under the new $6 million framework, use our SR&ED tax credit calculator. It’s free, takes about three minutes, and gives you a realistic range based on your expected qualifying expenditures.

The Forms: T661 and T2SCH31

Two federal forms anchor every SR&ED claim:

• Form T661 — SR&ED Expenditures Claim. The core document. Contains the technical narrative for each project (Part 2), the financial detail of qualifying expenditures (Part 3), and the calculation of the credit (Part 4 and later). The technical narrative is what the CRA reviewer reads first — concise, specific, and tied to the three eligibility tests.
• Form T2SCH31 — Investment Tax Credit — Corporations. Calculates the investment tax credit itself and its refundable and non-refundable portions. The numbers flow into the corporation’s T2 return.

Provincial schedules layer on top. In Ontario, claimants also file the Ontario Innovation Tax Credit (OITC) schedule and the Ontario Research and Development Tax Credit (ORDTC) schedule, both of which stack on top of the federal credit for qualifying corporations.

The SR&ED claim must be filed within 18 months of the corporation’s tax year-end. For December 31, 2024, tax year, the absolute deadline is June 30, 2026. The CRA does not grant extensions to this deadline except in narrow statutory cases. We strongly recommend filing well before the 18-month mark to leave room for CRA clarification questions.

What Technical Documentation to Keep

The minimum to support a claim that holds up under review:

• What the technological uncertainty was at the start of the project; written down, dated, before the work began where possible
• The hypotheses tested and the experiments or development cycles that tested them, with results recorded as they happened
• What was learned from both successes and failures, because failed experiments are often the most defensible evidence that real uncertainty existed
• Who worked on what, when, and for how long, time-tracking by project, ideally by phase
• What materials, contractors, and (now) capital equipment were used
• The technical decisions made along the way, design choices, architectural decisions, and abandoned approaches

Engineering notebooks, Git commit histories, sprint retrospectives, lab journals, project-management tools, and time-tracking exports all count. The companies that struggle in CRA review are typically the ones that built the documentation in the last week before filing.

What to Expect After You File

Once the claim is filed, three things can happen.

1. The claim is processed without review: The CRA’s service standard for refundable claims is 60 calendar days from receipt of a complete claim that isn’t selected for review. Many first-time claimants are surprised at how quickly approved claims get processed when there’s no review.

2. The claim is selected for review: Service standard is 180 calendar days for refundable claims under review, or 90 days for claims that went through the pre-claim approval process. Be ready to provide additional documentation, sit for a technical interview, or clarify specific expenditure lines.

3. The claim is partly or fully reduced: The CRA can disallow specific expenditures or specific projects. You have the right to request a second-level review and, if necessary, file a Notice of Objection.

Treat the next year as a continuous improvement cycle. Whatever the CRA flagged, fix it before the next filing. Tighten time-tracking discipline, expand the technical narrative on weak projects, document failed experiments more clearly. Companies that engage with CRA feedback have noticeably easier reviews in subsequent years.

Examples of SR&ED-Eligible Work

Three illustrative scenarios that show the shape of an eligible project. None of these are case studies of specific clients, they’re representative of the kind of work we routinely see qualify:

Robotics

A robotics company developing a novel grasping mechanism for fragile-object handling. The technological uncertainty: how to design a compliant gripper that adjusts force in real time without crushing the object or dropping it. The systematic investigation: iterative prototyping with sensor calibration testing, repeated against measurable failure-rate targets. 

Result: an advance in mechanical compliance and sensor-fusion control.

Financial software

A fintech building a real-time fraud-detection model on a transaction stream with novel latency requirements (sub-50ms scoring on streaming data). The uncertainty: whether the underlying model architecture could meet the latency target without sacrificing accuracy. The investigation: model architecture experiments, benchmarking against production constraints, iterative tuning.

eLearning platform

 An education-technology company building an adaptive-learning algorithm that adjusts content difficulty in real time based on learner performance signals. The uncertainty: which signal weightings produce the best learning outcomes for which learner profiles? The investigation: structured experimentation across cohorts, controlled testing against learning-outcome metrics.

Three different industries, three different technologies, one shared shape: a clear technological question, a systematic attempt to answer it, and a result that advances the field.

If Your Claim is Selected for CRA Review

The CRA reviews a meaningful share of refundable claims, particularly first-time claims and larger ones. A review isn’t an accusation; it’s the CRA’s standard quality-control process. What it looks like in practice:

The reviewer will typically request additional documentation supporting the technical narrative and the expenditure detail. For larger or more technically ambiguous claims, the CRA will arrange a technical interview, a meeting (often virtual) where a CRA Research and Technology Advisor questions the claimant directly on the science, the uncertainty, and the systematic investigation.

Three things help reviews go well:

• Contemporaneous documentation that was built during the year. This is the single biggest factor.
• A technical lead who can speak clearly to the work. The CRA reviewer wants to talk to the engineer or scientist, not just the accountant. Practise the conversation.
• An accountant who knows the file and can sit in the room. Mixed accounting and technical questions come up; a CPA familiar with both the claim and the broader corporate-tax picture handles them faster.

If a claim is reduced, the corporation can request a second-level review and, if necessary, file a Notice of Objection. We’ve been through the process with clients across multiple industries. For a deeper look at selecting the right help, see our guide on choosing a SR&ED consultant.

How SRJCA Helps With SR&ED

SR&ED claims sit at the intersection of tax filing, technical narrative, and CRA defence. As a full-service CPA firm, we prepare SR&ED claims as part of the corporation’s overall tax position, not as a one-off filing. That means the credit is integrated into the year-end return, the carry-forward is tracked across years, and the documentation discipline carries through to other corporate filings.

SRJ Chartered Accountants is a Toronto and Mississauga-based CPA firm serving Canadian corporations across tech, manufacturing, biotech, and professional services. Our team has worked on SR&ED claims of every size, from first-year startups filing under $100,000 to mature companies claiming the new $6 million enhanced limit. We handle the SR&ED claim, the corporate tax return, and the ongoing planning as one integrated engagement.

Whether you’re a first-time claimant trying to figure out if you qualify, or an established claimant whose current process isn’t holding up under CRA review, we can help.

Contact SRJCA today.

 FAQ’s

How does the SR&ED program work in Canada?

The CRA provides tax credits and refunds for eligible R&D work performed in Canada. Qualifying corporations claim the credit on their annual corporate tax return using Form T661. CCPCs and now ECPCs can earn a 35% refundable credit on the first $6 million of qualifying expenditures (under Bill C-15, for tax years starting on or after December 16, 2024). Other corporations earn a 15% non-refundable credit.

What’s the SR&ED tax credit rate in 2026?

35% on qualifying expenditures up to the $6 million enhanced limit for eligible CCPCs and Canadian public corporations, refundable. 15% on expenditures above the limit, and for other corporations, non-refundable. The 35% rate is unchanged from prior years, what changed under Bill C-15 is the expenditure limit (doubled from $3M to $6M) and the eligibility for the enhanced rate (extended to certain public corporations).

What expenses qualify for SR&ED?

Salaries and wages of staff directly engaged in SR&ED, contractor and subcontractor payments, materials consumed or transformed in the R&D, third-party payments to qualifying research institutions, overhead (under the traditional or proxy method), and new under Bill C-15, capital expenditures for property acquired after December 15, 2024.

What’s the deadline to file an SR&ED claim?

18 months after the corporation’s tax year-end. For December 31, 2024, tax year-end, the deadline is June 30, 2026. The CRA does not grant extensions to this deadline except in narrow statutory cases; miss it and the claim is permanently lost.

Are capital expenditures eligible for SR&ED in 2026?

Yes, for property acquired after December 15, 2024, and lease costs incurred after that date. Capital expenditures were excluded from 2014 until Bill C-15 restored them. This benefits hardware-heavy R&D,  manufacturing equipment, lab apparatus, GPUs, and compute infrastructure for AI/ML work.