What is SR&ED?

SR&ED (often written SRED) stands for Scientific Research and Experimental Development. It is the Government of Canada's largest program for encouraging businesses to do research and development, providing about $4.2 billion a year in support according to Budget 2025. If your team does work in Canada that tries to push past what is already known in science or technology, part of what you spend on that work comes back to you as a tax credit, and for many companies as cash.

The program is run by the Canada Revenue Agency (CRA) under the Income Tax Act. There is no application window and no competition for a fixed pot of money. If the work and the spending meet the rules, you can claim the credit.

The Income Tax Act defines SR&ED as systematic investigation or search, carried out in a field of science or technology, by means of experiment or analysis. The work has to be one of three kinds:

• Basic research: work to advance scientific knowledge without a specific practical use in mind.
• Applied research: work to advance scientific knowledge with a specific practical use in mind.
• Experimental development: work to achieve a technological advancement, to create new or improve existing materials, devices, products or processes, including incremental improvements.

Most business claims are experimental development. Supporting work can count too, as long as it is needed for and directly supports the main work: engineering, design, operations research, mathematical analysis, computer programming, data collection, testing and psychological research.

The same definition lists work that is never SR&ED on its own:

• Market research or sales promotion.
• Quality control or routine testing of materials, devices, products or processes.
• Research in the social sciences or the humanities.
• Prospecting, exploring or drilling for minerals, oil or natural gas, or producing them.
• Commercial production of a new or improved product, or commercial use of a new process.
• Style changes.
• Routine data collection.

A common mistake is to claim a whole project because part of it was hard. Usually only the part where the team hit a real technological uncertainty, and worked through it in a planned way, qualifies. The routine build around it does not, even if it was a lot of work.

The CRA's eligibility guidelines turn the definition into three questions about each project:

1. Was there a technological uncertainty? At the start, could you know how to reach the goal, or whether you could, using what was publicly known or what your team already knew? If a competent professional could have looked it up, there was no uncertainty.
2. Did you investigate it systematically? You formed an idea of how to solve it, tested that idea by experiment or analysis, measured the results and adjusted.
3. Did you aim for a technological advancement? The goal was new knowledge about the technology, not just a business result like a launch date or a new feature.

Behind all three sits a fourth, practical test: records. Notes, test results, code history, tickets and timesheets made while the work happened are what let you show the CRA what you tried and why. Claims built from memory a year later are the ones that struggle in a review. For examples across industries, see What work qualifies for SR&ED?.

• Canadian-controlled private corporations (CCPCs) make most claims and get the best treatment: a 35% credit on their first $6M of eligible spending each year, refundable in cash.
• Eligible Canadian public corporations can now earn the same 35% rate on their own limit, after the 2026 changes.
• Other corporations earn a 15% credit that lowers the tax they owe.
• Individuals, partnerships and trusts can also claim, with rules of their own.

SR&ED is about the kind of work, not the industry. Claims come from software, manufacturing, engineering, agri-food, life sciences, clean technology, materials, electronics and more. Small businesses file most of them: 64% of all claims, receiving about $1.5 billion in support in 2024-25, according to Budget 2025.

The work generally has to be done in Canada.

• Salaries and wages for the share of each person's time spent on SR&ED. This is usually most of a claim.
• Materials used up or transformed in the work.
• Contractors in Canada who do SR&ED work for you, counted in part.
• Overhead, either your actual costs or a flat stand-in called the proxy amount: 55% of the salaries of the people directly doing the work.
• Equipment and other capital used for SR&ED, eligible again for property bought on or after December 16, 2024.

Government help for the same work, like grants, lowers what you can claim. Owners and people related to them (specified employees) have extra limits on the salary you can include.

The $6M limit is shared by associated companies, and it shrinks when last year's taxable capital is between $15M and $75M. There is a lot more to how much comes back and when. See How to get money back from SR&ED for the full rules and worked examples.

A quick example: a CCPC that spends $400,000 of eligible salaries could get about $140,000 back federally. With the proxy amount for overhead added, it could be closer to $217,000, before any provincial credit.

You do the work first, then claim it with your tax return. A corporation files Form T661, which describes each project and its costs, together with Schedule 31, which works out the credit, alongside its T2 return.

The claim is due 12 months after your return's filing due date. For most corporations that is 18 months after the tax year ends. The CRA does not accept late SR&ED claims, so a missed deadline means that year's credit is gone. The full process is in How to file an SR&ED claim.

From April 1, 2026 the CRA is also offering an optional pre-claim approval: you can ask it to confirm that a project's work is eligible before you start it or spend money on it.

Not quite. People often call it the SR&ED grant, but it is a tax credit. A grant is approved before you start, usually with a set amount and a competition for funds. SR&ED is claimed after the work is done, based on what you actually spent, and anyone whose work meets the rules can claim it. For CCPCs, the refundable part feels a lot like a grant, because it arrives as cash. More in Is SR&ED a grant?

Sredify connects to the tools your team already uses, finds the work most likely to qualify, ties it to the people and hours behind it, and drafts the T661 project descriptions. Recorded time and estimates are kept apart and labelled, so every hour can be traced. Your accountant or SR&ED preparer reviews everything before it is filed.