Scientific Research and Experimental Development (SR&ED) is the largest R&D incentive program in Canada, administered by the CRA. It provides tax credits — and in many cases refundable cash — to businesses that conduct eligible research or development work. Many small business owners don't realize that their day-to-day problem-solving and product development may qualify.
Who Qualifies for SR&ED Credits
Any Canadian taxpayer (individual, corporation, or partnership) can claim SR&ED credits. However, Canadian-Controlled Private Corporations (CCPCs) get the most favourable treatment: up to 35% in refundable Investment Tax Credits (ITCs) on the first $3 million of eligible expenditures.
The work must advance scientific or technological knowledge by attempting to resolve a scientific or technological uncertainty that cannot be resolved through routine engineering or standard practice.
The Three-Part Test for SR&ED Eligibility
- Scientific or technological advancement — the work must try to advance scientific or technological knowledge, not just implement existing knowledge
- Scientific or technological uncertainty — you must be attempting to resolve uncertainty that a competent professional cannot resolve through standard practice
- Systematic investigation — the work must follow a systematic approach: hypothesize, test, analyze results
All three criteria must be met. Documentation is critical — the CRA will review your project records.
Eligible and Ineligible Expenditures
Eligible
- Salaries and wages of employees directly engaged in SR&ED work (100% eligible)
- Materials consumed in the SR&ED work
- Overhead (lease, utilities, equipment use) — calculated using a proxy amount (55% of labour)
- Contract payments to Canadian SR&ED performers (80% eligible)
- Payments to non-arm's length parties for SR&ED (80% eligible with restrictions)
Not Eligible
- Market research, sales promotion, quality control
- Routine data collection and testing
- Style changes to products
- Routine software maintenance
- Social science research
Credit Rates for 2026
| Taxpayer Type | Credit Rate | Refundable? | Limit |
|---|---|---|---|
| CCPC (first $3M) | 35% | Fully refundable | $3M expenditure limit |
| CCPC (above $3M) | 15% | Non-refundable | No limit |
| Other corporations | 15% | Non-refundable | No limit |
| Individuals/partnerships | 15% | Non-refundable | No limit |
Refundable means the CRA will pay the credit to you even if you have no tax owing — making this effectively a cash grant for small CCPCs.
How to Claim
SR&ED claims are filed using:
- Form T661 — SR&ED Expenditures Claim (describes the projects)
- Schedule T2SCH31 (for corporations) or Form T2038 (for individuals) — calculates the ITC
The claim is filed with your annual income tax return. The deadline to file a SR&ED claim is 18 months after the end of the tax year in which the work was performed.
Documentation must be kept for every project: lab notebooks, test records, version control logs, meeting notes, and project plans that show the systematic investigation.
Think Your Work Might Qualify?
MaxRefund works with SR&ED specialists to identify eligible work, prepare the technical narrative, and calculate your maximum credit. Most CCPC claims generate a refund cheque within 60–90 days of filing.
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