SR&ED for Hardware and Engineering Teams
Hardware R&D is often more obviously SR&ED-eligible than software work — prototypes, testing iterations, and physical experimentation leave clear evidence trails. Here's how engineering teams can structure their claims.
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Why hardware claims are often stronger
Physical prototyping creates natural evidence. Every iteration produces a tangible artifact. Testing generates measurable data. Failed approaches are documented in lab notes. This evidence trail makes hardware SR&ED claims easier to defend than software claims, where the work is intangible and the evidence is distributed across git repos, Slack threads, and sprint boards.
The key for hardware teams is to document the technological uncertainty at each stage: Why was the first prototype insufficient? What constraint did the second iteration fail to meet? How did the third approach differ, and what did you learn from the failures?
Documentation that hardware teams should keep
- Design specifications and requirement documents that establish baseline constraints
- Prototype iteration logs with photos, measurements, and failure descriptions
- Test results and benchmarking data for each prototype version
- Lab notebooks or digital logs recording hypotheses, experiments, and outcomes
- Material and component procurement records linked to specific prototypes
- Engineer time allocation by prototype iteration and testing phase
Common hardware claim pitfalls
Hardware teams sometimes overclaim by including production tooling, manufacturing setup, or quality assurance as R&D. Production optimization and routine testing of final designs are not SR&ED. The eligible work stops when the design is validated and production begins.
Claiming production tooling or manufacturing setup as R&D is a common error. The boundary is: R&D ends when the technology is validated. Production begins when you're building the validated design at scale.
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More guides
What Actually Makes Software Work SR&ED-Eligible?
Most software companies doing real R&D leave SR&ED credits on the table because they don't recognize their own qualifying work. Here's the eligibility distinction that matters.
DocumentationThe Evidence Habit: What to Save Before Year-End
SR&ED claims are significantly easier to defend when you've been saving the right artefacts throughout the year. A practical pre-year-end checklist for Canadian tech companies.
T661 WritingHow to Talk About Uncertainty Without Overclaiming
The language you use in a T661 narrative matters. Overstating uncertainty reads as speculative. Understating it undersells the challenge. Here's how to write about technical uncertainty in CRA-ready language.
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