In short
- SR&ED is a tax credit, not a grant, even though many people call it the SR&ED grant.
- You claim it after the work is done, based on what you spent. There is no application or competition.
- For Canadian-controlled private corporations the refundable credit arrives as cash, which is why it feels like a grant.
- You can use grants and SR&ED together, but a grant for the same work reduces the SR&ED claim.
The short answer
No. People often call it the SR&ED grant, and for many companies it feels like one, but SR&ED is an investment tax credit under the Income Tax Act. The difference matters for when you get the money, how you qualify, and how it works with real grants.
The confusion is understandable. For a Canadian-controlled private corporation, the 35% credit on current spending is refundable: the CRA pays it out even if the company owes no tax. A cheque from the government for research looks a lot like a grant. See How to get money back from SR&ED for how that works.
SR&ED compared with a grant
- When you apply
- SR&ED tax creditAfter the work, with your tax return
- Typical grantBefore the work starts
- Approval
- SR&ED tax creditNo approval needed up front (optional pre-claim approval from April 2026)
- Typical grantApproved in advance, often competitively
- Amount
- SR&ED tax creditA set percentage of eligible spending
- Typical grantA set amount or share of a budget, decided by the program
- Funding limit
- SR&ED tax creditOpen to everyone who qualifies, no fixed pot
- Typical grantLimited budget, intakes can close
- Who decides
- SR&ED tax creditThe rules in the Income Tax Act, checked by the CRA
- Typical grantA program officer or panel
- Paperwork
- SR&ED tax creditForm T661 and Schedule 31, plus your records
- Typical grantApplication, milestones and reports
- Cash timing
- SR&ED tax creditAfter your claim is processed
- Typical grantOften in stages during the project
| SR&ED tax credit | Typical grant | |
|---|---|---|
| When you apply | After the work, with your tax return | Before the work starts |
| Approval | No approval needed up front (optional pre-claim approval from April 2026) | Approved in advance, often competitively |
| Amount | A set percentage of eligible spending | A set amount or share of a budget, decided by the program |
| Funding limit | Open to everyone who qualifies, no fixed pot | Limited budget, intakes can close |
| Who decides | The rules in the Income Tax Act, checked by the CRA | A program officer or panel |
| Paperwork | Form T661 and Schedule 31, plus your records | Application, milestones and reports |
| Cash timing | After your claim is processed | Often in stages during the project |
Grants that often come up with SR&ED
The best known is the National Research Council's Industrial Research Assistance Program (IRAP), which funds and advises small and medium businesses on innovation projects. Provinces and regional agencies run their own programs, and some industries have targeted funds.
Grants and SR&ED are not either or. Many companies use a grant to fund a project while it runs, then claim SR&ED on the eligible spending the grant did not cover.
How grants and SR&ED stack
The Income Tax Act treats grants, subsidies and similar help from any level of government as government assistance. Assistance you receive, or are entitled to receive, for the same work reduces the spending you can use for the SR&ED credit.
Example
A project with an IRAP grant
- Eligible salaries on the project
- $200,000
- Grant received for those salaries
- $80,000
- Spending left for SR&ED
- $120,000
- SR&ED credit at 35%
- $42,000
Simplified: the grant and the credit together cover $122,000 of the $200,000. Without the grant, the credit alone would be $70,000.
- Provincial R&D tax credits count as government assistance for the federal credit too.
- Payments from a client to do SR&ED for them (contract payments) also reduce your claim, because the client may claim it instead.
- Repaying assistance later restores the credit for the amount you repaid, in the year you repay it.
Which one should you use?
- Use SR&ED for ongoing technical work across the year. Anyone whose work qualifies can claim, and the amount grows with your spending.
- Add a grant when you need money before or during a project, or when the project includes work SR&ED does not cover, like commercialization.
- Plan both together. Keep the grant's costs and the SR&ED costs clearly tracked, so the same dollar is not counted twice and your claim matches what you reported to the grant program.
Getting certainty up front
One advantage grants used to have was knowing in advance. From April 1, 2026 the CRA offers an optional pre-claim approval, where it reviews a project's technical eligibility before you start the work or spend the money. Claims that use it and still need a cost review have a 90 day processing target instead of 180.
Frequently asked questions
Is the SR&ED grant real?
There is no SR&ED grant as such. The program is a tax credit. People call it a grant because, for Canadian-controlled private corporations, the refundable part is paid in cash.
Do I have to pay SR&ED back?
No. A credit you are entitled to is not a loan. If a CRA review later reduces the claim, you repay only the part that was not allowed.
Can I get IRAP and SR&ED for the same project?
Yes. The IRAP funding reduces the spending you can claim for SR&ED, but you can still claim the eligible part the grant did not cover.
Do I need approval before claiming SR&ED?
No. You claim after the work is done. Pre-claim approval from April 2026 is optional.
Is SR&ED better than a grant?
They do different jobs. SR&ED is open to every company whose work qualifies and scales with spending. A grant can bring money earlier and cover work SR&ED does not. Many companies use both.
Prepare your SR&ED claim with Sredify
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- Income Tax Act s. 127: government assistance and qualified expenditures
- Income Tax Act s. 127.1: refundable investment tax credit
- Budget 2025, chapter 1: pre-claim approval
- CRA: SR&ED tax incentive program
This guide explains the general rules. It is not tax advice: talk to your accountant or SR&ED preparer about your own claim.