Having issues understanding what work is eligible for your SR&ED tax credit application?

One of the biggest hurdles faced by prospective SR&ED tax credit applicants is knowing exactly what SR&ED activities the CRA considers eligible.

Here we provide a short rundown of the four SR&ED activities that are eligible to claim: basic research, applied research, experimental development, and support work. 

What SR&ED Activities Can I Claim?

Basic Research

CRA definition: Work undertaken for the advancement of scientific knowledge without a specific practical application in view.1

In layman’s terms: Science for the sake of science. Basic research doesn’t have an exact end in mind, nor a specific problem it’s trying to solve. Basic research is carried out solely for the purpose of scientific discovery outside of the status quo.

Fun fact: Perhaps the most famous example of basic research is when Alexander Fleming decided to study a mould he found on a petri dish, which led to the discovery of penicillin.2

Applied Research

CRA definition: Work undertaken for the advancement of scientific knowledge with a specific practical application in view.3

In layman’s terms: Applied research is carried out to solve a specific problem. If you own a car company and find that your cars are too slow, applied research uses experimentation to answer the questions “Why are they slow?” and “What can we do to make them faster?”

Fun fact: Applied research often comes from basic research. Fleming may have stumbled upon penicillin with basic research, however, the development of its many uses falls under applied research.

Experimental Development

CRA definition: Work undertaken to achieve technological advancement for the purpose of creating new, or improving existing materials, devices, products or processes, including incremental improvements.4

In layman’s terms: The goal of any SR&ED project is to fill a technological gap, whether that’s revolutionizing a production process or increasing productivity.

Fun fact: Approximately 95% of SR&ED claims fall into the category of experimental development.

Support Work

CRA definition: Engineering, design, operations research, mathematical analysis, computer programming, data collection, testing, and psychological research that is necessary and directly in support of the other three categories, undertaken in Canada or on behalf of the taxpayer.5

In layman’s terms: If you administered any work that falls under the above categories (basic or applied research and experimental development) in support of your SR&ED efforts, you can claim it.

Fun fact: This is easily the most overlooked of the four categories. Make sure you claim all you can.

Additionally…

Be sure you’re familiar with the concept of “directly in support of” and “commensurate with the needs” from the SR&ED Glossary: 6

Within the context of SR&ED, work that is directly in support is work that was carried out specifically to perform the related basic research, applied research or experimental development.

Within the context of SR&ED, work that is commensurate with the needs must be corresponding in the amount, size, extent, or duration that is necessary to carry out basic research, applied research, or experimental development.

 

Need more information about the types of activities you can claim in SR&ED?
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Show 6 footnotes

  1. Government of Canada. (July 15, 2015.) SR&ED Glossary: Basic Research. (Accessed: September 7, 2017.) Retrieved from: https://www.canada.ca/en/revenue-agency/services/scientific-research-experimental-development-tax-incentive-program/glossary.html#bscrsrch.
  2.  American Chemical Society International Historic Chemical Landmarks. Discovery and Development of Penicillin. (Accessed: September 7, 2017.) Retrieved from: http://www.acs.org/content/acs/en/education/whatischemistry/landmarks/flemingpenicillin.html.
  3. Government of Canada. (July 15, 2015.) SR&ED Glossary: Applied Research. (Accessed: September 7, 2017.) Retrieved from: https://www.canada.ca/en/revenue-agency/services/scientific-research-experimental-development-tax-incentive-program/glossary.html#ppldrsrch.
  4. Government of Canada. (July 15, 2015.) SR&ED Glossary: Experimental Development. (Accessed: September 7, 2017.) Retrieved from: https://www.canada.ca/en/revenue-agency/services/scientific-research-experimental-development-tax-incentive-program/glossary.html#xpdvlpmnt.
  5. Government of Canada. (July 15, 2015.) SR&ED Glossary. (Accessed: September 7, 2017.) Retrieved from: https://www.canada.ca/en/revenue-agency/services/scientific-research-experimental-development-tax-incentive-program/glossary.html.
  6. Government of Canada. (July 15, 2015.) SR&ED Glossary. (Accessed: September 7, 2017.) Retrieved from: https://www.canada.ca/en/revenue-agency/services/scientific-research-experimental-development-tax-incentive-program/glossary.html.

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