SR&ED Tax Incentives
What are SR&ED tax incentives?
Scientific research and experimental development (SR&ED) is a systematic investigation or search that’s carried out in a field of science or technology by means of experiment or analysis and that the work performed involves basic research, applied research or experimental development.
Scientific Research and Experimental Development (SR&ED) tax incentives are a government program in Canada. As described by the Government of Canada, SR&ED tax incentives are intended to encourage businesses to conduct research and development in Canada. If your business (or other eligible organization) is engaged in scientific research and experimental development – like the Innovation Challenges you submit through OCIP, for example – you may be able to earn tax incentives that reduce your income tax payable.
The SR&ED program includes a rigorous regulatory regime, which means claimants need to focus on thorough eligibility assessment and substantiation of claims.
All information below was sourced from the Government of Canada, and can be found on the Goverment of Canada ‘Scientific Research and Experimental Development (SR&ED) tax incentives‘ page.
How businesses can benefit from SR&ED tax incentives
Depending on the size and type of business, SR&ED incentives are:
- A deduction against income
- An investment tax credit (ITC) that can be non-refundable or refundable
How much businesses can earn depends on the type of business structure and the qualified SR&ED expenditures businesses have (see ITC rates for various entities)
What type of work is eligible for SR&ED tax incentives?
All Ontario higher education institutions (HEIs) are designated R&D Providers with CRA however the activities do need to meet the CRA definition of R&D (cannot be late-stage projects, i.e. TRL9
The Government of Canada provides a SR&ED Self-Assessment and Learning Tool (SALT) to
- Check eligibility
- Estimate investment tax credits (ITC)
All Ontario HEIs are designated R&D Providers with CRA however the activities do need to meet the CRA definition of R&D
For the detailed technical guidelines, see Guidelines on the Eligibility of Work.
How to claim?
The following information was gathered on Claim the SR&ED investment tax credit
Here is a simplfied process map for claiming a SR&ED project:
1) Gather and organize claimant and project information
2) Calculate SR&ED expenditures
- Salary or wages (See SR&ED Salary or Wages Policy)
- Materials (See Materials for SR&ED Policy)
- Contracts for SR&ED (See Contract Expenditures for SR&ED Performed on Behalf of a Claimant Policy)
- Overhead and other expenditures (See Guide T4088 Section A – Select the method to calculate the SR&ED expenditures)
- Third-party payments (See Third-Party Payments Policy)
3) Use the Self-Assessment & Learning Tool to:
- identify if a project is eligible
- get an estimate of qualified SR&ED ITC
4) After completing the self-assessment, claimers can request pre-claim service to confirm the project qualifies
5) Complete the required forms to submit a SR&ED claim
For a detailed line-by-line description of the form, see T4088 Scientific Research and Experimental Development (SR&ED) Expenditures Claim – Guide to Form T661
- Investment Tax Credit form
- Corporations: Schedule T2SCH31, Investment Tax Credit – Corporations
- Individuals: Form T2038(IND), Investment Tax Credit – Individuals
6) Organize and keep technical and financial information to support your claim (See Appendix 2 of Guide T4088, Scientific Research and Experimental Development (SR&ED) Expenditures Claim)
7) Submit claim forms
8) After businesses submit your claim
- The claim will be processed and may be selected for a detailed review
- If businesses disagree with the CRA’s decision, they can
- Filing an objection (see Resolving disputes)
- Filing an appeal (see Objections and Appeals)
When to claim?
“You must report the SR&ED expenditures and submit your ITC claim no later than 12 months after your business, corporation or trust income tax return is due.”
For more information on the SR&ED reporting deadlines see the SR&ED Filing Requirements Policy
SR&ED policies and procedures
For a summary of SR&ED policies and procedures, see here
SR&ED glossary contains explanations of terms uses within these policies, procedures, and guidelines.
Contact & Resources
First-time claimants may be selected to receive the government’s First-Time Claimant Advisory Service
The SR&ED Program is offering a new virtual service for claimants that provides an opportunity to meet with a Canada Revenue Agency SR&ED representative
Contact a SR&ED Specialist to get more info on how the SR&ED Program can help my company
Assess a new project and find out if another project will potentially qualify for SR&ED support
Doing SR&ED in production or manufacturing environments:
eCampusOntario is a not-for-profit centre of excellence and global leader in the evolution of teaching and learning through technology.
OCIP is made possible with funding from the Ontario Ministry of Colleges and Universities.
