Common SR&ED Mistakes That Cost Founders Their Credits
The most expensive SR&ED mistakes aren't complex legal errors. They're simple, avoidable missteps that founders make because no one warned them. Here's what to watch for.
Mistake 1: Missing the filing deadline
The SR&ED filing deadline is 12 months after your T2 corporate return is due — not 12 months after year-end. For a December 31 fiscal year-end, the T2 is due June 30, making the SR&ED deadline the following June 30. Many founders calculate from year-end and miss by six months.
Once the deadline passes, the claim is gone. CRA does not grant extensions for SR&ED filing deadlines. The only remedy is to file on time.
Mistake 2: Vague or inflated narratives
Narratives that describe work in generic terms — 'we built a new feature,' 'we improved performance,' 'we integrated with a third-party API' — don't communicate the technological uncertainty or systematic investigation that CRA evaluates.
Specificity is credibility. 'We reduced API latency' is weak. 'We prototyped three caching strategies because standard approaches created consistency gaps under our write-heavy load, eventually developing a partitioned invalidation layer with version vector resolution' is strong — and defensible.
Mistake 3: Poor time allocation records
SR&ED claims based on estimated percentages — 'about 30% of engineering time' — are weak. CRA expects time records that show who worked on what, when, and for how long. The best claims have timesheet entries, Jira logs, or sprint records that map directly to qualifying projects.
'Engineer A: 120 hours on caching layer (Sprints 34–37). Engineer B: 80 hours on ML inference pipeline (Sprints 35–38). Engineer C: 40 hours on data validation framework (Sprints 36–39). Total SR&ED wages: 240 hours at $85/hour blended rate = $20,400.'
Mistake 4: Claiming non-qualifying work
Founders sometimes include routine development, commercial activities, or maintenance work in SR&ED claims. This doesn't just reduce the valid portion — it can trigger broader review of the entire claim. Conservative, well-documented claims are stronger than generous, poorly-supported ones.
This guide discusses common SR&ED preparation errors based on publicly available CRA guidance and practitioner experience. It does not constitute legal or tax advice. For specific questions about your claim, consult a qualified Canadian CPA with SR&ED experience.
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