Any Canadian corporation, individual, trust or partnership can claim SR&ED tax credits on eligible expenditures incurred within a fiscal year.

Companies in a wide array of industries can claim SR&ED including those in software development, manufacturing, biotech, construction, to name a few. Anyone innovating in a field of science or technology can be eligible.

The work needs to be done in a field of science or technology by qualified professionals. If the work is experimental in an attempt to develop new knowledge in the field by overcoming uncertainties, then it is eligible.

For example, in a software company where a development team is working on developing advanced algorithms to process large amounts of data in a way that is not possible with off the shelf technologies and common knowledge, the work is eligible.

SR&ED is about achieving a technological advancement, or simply put a gain in knowledge.

Eligible work must be conducted within Canada. Types of eligible expenditures are salaries paid to Canadian employees, Canadian-based contractors, cost of materials, third-party payments to organizations performing research on your behalf, and overhead costs.

For a software company developing software, eligible costs include salaries, contractor amounts, third-party payments and overhead but do not include material costs since the eligible SR&ED work is not on a tangible product.

A SR&ED claim can be filed up to 18 months after your fiscal year end. Claims are filed with the T2 corporate tax return or amended return and can include a provincial claim as well.

Don’t delay! File your claim quickly after the tax deadline so that you can access the credits and ensure you don’t miss a deadline.

Yes, you can claim a refundable SR&ED tax credit on eligible expenditures even if you do not have any revenue. The CRA will send you a refund via direct deposit after your claim has been accepted.

For example, if you are a pre-revenue software company spending $200,000 on eligible software development in a year, you could receive a refund of $128,000 to further your R&D.

Yes, this is commonly done in early-stage tech companies. The eligible SR&ED expenditures are reduced by the amount of IRAP funding received. You can’t double-dip, however there is a benefit to claiming both IRAP and SR&ED since SR&ED gives you a proxy amount for overhead on eligible SR&ED salaries. There can be a significant benefit to claiming both. As a founder, every R&D dollar counts!