At SREDucation, we’re taking the time to document all of the changes that have occurred to the SR&ED program over the years. In our “From the Archives” series, you’ll be able to see how the program has evolved since its inception in 1986. For a timeline of these events, check out the SR&ED Tax Credit page on Facebook. Stay current with the program by understanding the historical context.
In September 2002, the Canada Revenue Agency (CRA) along with a panel of industry experts prepared a guide to assist taxpayers in recognizing experimental development. The panel of experts was part of the Eligibility Drafting Group, which was created to prepare supplements and guides to submit to the SR&ED Action Plan Steering Committee; this committee’s main function was to implement action plans responding to the findings of the 1998 SR&ED Conference Building Partnerships.
Key SR&ED Concepts Clarified
Within this guide, various key definitions and concepts are detailed, namely the definitions of SR&ED and experimental development, as well as a detailed comparison between technological advancement and technological uncertainty.
SR&ED & Experimental Development Defined
The guide defines SR&ED as “systematic investigation or search that is carried out in a field of science or technology by means of experiment or analysis” and explains what is included and excluded in SR&ED. Within the accepted definition, SR&ED includes not only basic research, applied research, and experimental development, but also “engineering, design, operations research, mathematical analysis, computer programming, data collection, testing, and psychological research.” On the other hand, it does not include such work as market research, sales promotion, quality control, and routine data collection, for example.
Also within this supplement, experimental development is defined for SR&ED purposes as “work performed with the intent to achieve a technological advancement for the purpose of creating new, or improving existing, materials, devices, products, or processes, including incremental improvements.”
Technological Advancement vs. Technological Uncertainty in SR&ED
Technological advancement and uncertainty go hand in hand. Within SR&ED, one of the key principles is that the “attempts to resolve technological uncertainty through a systematic investigation or search by experiment or analysis will result in a technological advance.” In other words, all progress made to resolve a technological uncertainty can be considered as technological advancement and as such, is eligible for SR&ED since “work in any year that directly contributes to or supports the attempt is part of the experimental development.”
This article is based upon a Government of Canada news release issued at the time: Recognizing Experimental Development [no longer available].