SR&ED Eligibility: Does Your Work Qualify?
Many Canadian businesses doing genuine technical work qualify for SR&ED tax credits — and don't know it. The key is understanding what CRA actually looks for, and whether your projects clear the bar.
The three eligibility criteria
CRA evaluates every SR&ED project against three requirements. To qualify, your project must satisfy all three.
1. Technological uncertainty
At the time the work started, the outcome was not known and could not be determined by a knowledgeable expert using standard practice or existing information.
2. Systematic investigation
The team followed a structured approach to resolving the uncertainty: formulating hypotheses, testing them, analyzing results, and drawing conclusions.
3. Technological advancement
The work generated new knowledge — an advancement in the general body of knowledge in the relevant field.
Examples of work that typically qualifies
- Developing a novel machine learning architecture where accuracy or latency targets were not achievable with existing models
- Building software where no documented approach existed to solve a specific integration, scaling, or performance problem
- Designing a manufacturing process to achieve material properties or tolerances not previously documented
- Creating new embedded systems or hardware where timing, power, and accuracy constraints required original solutions
- Conducting biotech or chemistry research to develop compounds with properties not achievable using known methods
Examples of work that typically does not qualify
- Routine software development using well-documented frameworks and standard tools
- Adapting existing technology for a new use without facing technical uncertainty
- Quality control testing of commercial products and routine data collection
- Market research, sales promotion, feasibility studies, or business planning
- Social science and humanities research
- Style changes to existing products or processes
- Training or hiring experts solely to apply existing knowledge
Common industries with qualifying work
- Software and technology companies (SaaS, AI, ML, cybersecurity)
- Manufacturing (process improvements, new materials)
- Biotech and medical devices
- Cleantech and energy
- Agriculture technology
- Financial technology
Common questions
Does our work need to be novel or patent-worthy?
No. SR&ED doesn't require novelty in the patent sense. You need genuine technical uncertainty that a knowledgeable expert couldn't resolve using standard practice.
Can contractor costs be included?
Yes. Fees paid to arm's-length Canadian contractors for SR&ED work are eligible at 80% of cost.
What's the difference between SR&ED and a grant?
SR&ED is a tax credit claimed through your corporate return based on work already done. Grants are forward-looking awards requiring applications before work begins.
Related SR&ED guides
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