SR&ED Myths Debunked: What Canadian Founders Get Wrong
Common misconceptions about SR&ED that cost Canadian founders money. From 'we need a lab' to 'our work isn't innovative enough' — the myths that prevent valid claims.
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Myth 1: We need a dedicated R&D department
False. Many SR&ED claimants are regular software, manufacturing, or engineering companies whose technical teams solve problems as part of normal work. You need genuine technical uncertainty and systematic investigation — not a separate lab.
A 5-person SaaS company with no 'R&D department' claimed $120K in qualifying wages because their engineers spent 40% of their time resolving technical uncertainties that existing knowledge couldn't address. The SR&ED credit was $42K in federal refundable credits.
Myth 2: Our work isn't innovative enough
False. SR&ED doesn't require breakthrough innovation. It requires systematic investigation of technical uncertainty. The standard is 'advancement in the field,' not 'revolutionary discovery.'
Most founders underestimate their qualifying work. The engineer who spent three weeks investigating why a database query was slow under a specific load pattern — and documented the investigation — did qualifying work. The work doesn't need to be publishable; it needs to be systematic.
Myth 3: We need formal documentation
False. CRA accepts informal contemporaneous records: Slack threads, email chains, personal notes, commit messages, and meeting notes. The key is that the records show the investigation process, not that they are in a formal format.
The documentation standard is: can a reasonable person understand what uncertainty you faced, what you tried, and what you learned? If yes, the documentation is sufficient. If no, even a formal report won't help.
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