The SR&ED Program provides Canadian businesses with tax credits or refunds for eligible R&D activities.

FAQs cover eligibility, qualifying work, claimable expenses, filing deadlines, and refund timelines.

Industry-specific examples include software development, biotechnology, aerospace, food and beverage,

renewable energy, and manufacturing, illustrating how various sectors benefit from innovation incentives.

Clear, client-friendly FAQs about the Scientific Research and Experimental Development (SR&ED) Program in Canada.

What exactly is SR&ED?

The Scientific Research and Experimental Development (SR&ED) Program, also known as the "shred" programme, is a federal tax incentive that encourages businesses to conduct research and development (R&D) in the United States and Canada. The Canada Revenue Agency (CRA) oversees the SR&ED programme, which awards approximately $6 billion in tax credits for approved research and development activity each year. A list of frequently asked questions concerning SRED is available here.

What is the procedure for claiming SR&ED tax credits?

SR&ED credits are available in the form of refundable and non-refundable tax credits applied to expenditures for scientific research and development. To apply, you must complete Form T661. Use of this form will assist you in preparing the technical reports that will be used to support your SR&ED claim.

The CRA may reject your claim if the SR&ED schedules and forms are not correctly completed.

This is one of the most common reasons that SR&ED claims are refused. Thus, it is critical that you engage a firm with extensive SR&ED experience. In addition, our staff has proven successful experience in preparing SR&ED claims that recover the majority of your R&D expense

Who is eligible to claim SR&ED?

Canadian businesses of all sizes may qualify, including private corporations, public corporations, sole proprietors, and partnerships. The work must be done in Canada and involve solving a technological uncertainty.

Example:

A manufacturing company is improving precision tooling processes.

A renewable energy startup is testing new wind turbine designs.

A biotech firm experimenting with new drug formulations.

What types of activities qualify for SR&ED?

Eligible activities involve experimental development, applied research, and basic research aimed at resolving technological challenges.

Routine work or cosmetic changes do not qualify unless they directly support experimental work.

Examples:

Biotechnology: Experimenting with new enzyme formulations for industrial use.

Software & Digital Media: Developing a new app architecture to handle large-scale real-time data.

Aerospace: Designing lightweight, high-strength materials for aircraft components.

Food & Beverage: Creating a process to extend the shelf life of perishable products without preservatives.

Telecommunications: Developing a more efficient signal compression algorithm.

What expenses can be claimed under SR&ED?

Eligible expenses include salaries/wages, subcontractor costs, materials, and certain overheads directly tied to R&D. Capital expenditures are generally excluded.

Examples:

Allocating overhead costs like utilities for a lab conducting experimental trials.

Paying engineers to develop a robotic assembly line in manufacturing.

Buying chemicals for experimental testing in a biotech lab.

Subcontracting a software team to develop new AI modules

How far back can SR&ED claims be filed, and when are refunds received?

Claims must be filed within 18 months of the company’s fiscal year-end. Refund timelines vary, often a few months for small claims, longer for larger or reviewed claims.

Example:

A digital media firm submitting for AI research completed the previous year.

A mechanical engineering company files a claim in 2026 for prototype testing done in 2025