How to get money back from SR&ED

Every SR&ED claim produces an investment tax credit: a percentage of your eligible spending that you can use against your taxes. What matters for cash flow is whether that credit is refundable.

• A refundable credit is paid out to you. If it is bigger than the tax you owe, the CRA sends you the difference. A company with no taxable income at all still gets the money.
• A non-refundable credit only lowers tax you owe. If you owe no tax this year, you keep the credit and use it in another year.

This is why SR&ED matters so much to startups and growing companies. A business that is spending heavily on development and not yet profitable can still get a large part of that spending back in cash.

Current spending means the day-to-day costs of the work: salaries, materials, contractors and overhead. Capital spending means equipment and other property used for SR&ED, which became eligible again for property bought on or after December 16, 2024.

A credit you cannot use this year is not lost. Unused non-refundable credit can be carried back up to 3 years to recover tax you already paid, or carried forward to future years.

The 35% rate applies to your first $6M of eligible spending each year, the expenditure limit. It went up from $3M for tax years that start on or after December 16, 2024.

The full limit applies when last year's taxable capital employed in Canada, yours plus that of any associated companies, is $15M or less. Between $15M and $75M it shrinks in a straight line, and at $75M it reaches zero:

• Associated companies share one limit. If you own or control more than one company, the group splits the $6M between them.
• Eligible Canadian public corporations use the same formula, but measured on their average revenue over the last three years instead of taxable capital.
• Short tax years (under 51 weeks) get a limit reduced in proportion to the number of days.

• Salaries and wages for the share of time each person spent on SR&ED. A developer who spent 40% of the year on eligible work counts 40% of their salary.
• The proxy amount for overhead: instead of tracking rent, utilities and admin costs, most companies use a flat 55% of the salaries of the people directly doing the work. It has caps, and it replaces claiming actual overhead.
• Materials used up or transformed in the work, like prototype parts or test batches.
• Contractors in Canada doing SR&ED for you, counted in part.
• Capital equipment used for SR&ED, bought on or after December 16, 2024.

Not sure if your work counts in the first place? See What work qualifies for SR&ED?

These are simplified federal examples. They leave out provincial credits, specified employee limits and the effect on next year's taxes, which your accountant will work through.

You claim the credit with your corporate tax return by filing Form T661 and Schedule 31. The CRA processes the claim, and refundable credits are paid to you or applied to any balance you owe. Some claims are reviewed first: a technical review of whether the work is SR&ED, a financial review of the costs, or both.

From April 1, 2026 the CRA offers an optional pre-claim approval of a project's eligibility. For claims that go through it and still need a review of the costs, Budget 2025 cuts the processing target in half, from 180 days to 90. The CRA is also using more automation to send low-risk claims through without an audit.

The claim is due 12 months after your return's filing due date, which for most corporations is 18 months after the tax year ends. Filing your return and the SR&ED claim together, as early as you can, gets the money to you soonest.

Most provinces have their own research and development tax credit that you claim alongside the federal one, including Ontario, Quebec and British Columbia. Rates, refundability and rules differ by province. Because a provincial credit counts as government help for the same work, it reduces the spending used for the federal credit a little, but together they are worth more than the federal credit alone.

• Grants and other government help for the same work, like IRAP funding, reduce your eligible spending.
• Associated companies share one $6M limit.
• Specified employees, meaning owners of 10% or more and people related to them, have limits on the salary and bonuses you can include.
• The credit affects next year's taxes. Credits you claim reduce the SR&ED expenses you can deduct in the following year, so the after-tax benefit is a bit lower than the headline rate.
• Work outside Canada generally does not count.

1. Keep records as the work happens. Code history, tickets, test results and timesheets made at the time are what make every hour in the claim stand up.
2. Count everyone involved. Testers, analysts and people supporting the work can count for the share of their time spent on SR&ED.
3. Claim every eligible year. Each year has its own 18 month window, and it does not get extended.
4. Check your numbers early. Taxable capital, associated companies and last year's taxable income decide your rate and limit.
5. Use the proxy method unless your real overhead is clearly higher.

Sredify does the first two for you: it reads the work in the tools your team already uses, ties it to the people behind it, and labels recorded time apart from estimates, so your accountant gets a claim that is easy to check.