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.
On Sept. 22, 2002, the federal government released a guide to recognizing experimental development in the context of SR&ED. The document was intended to address questions regarding eligibility requirements for SR&ED.
Industry and representatives from the Canada Customs and Revenue Agency worked together to come up with an objective definition of experimental development.
“In preparation for drafting this document, the group reviewed the law, historical background, and various Information Circulars to ensure that the comments below are consistent with the principles embodied in the law and reflect the government’s intent of the SR&ED program,” read a notice issued at the time.
The Law and SR&ED
The government stated that experimental development, under the law (Income Tax Act), encompassed items such as basic research, applied research and work for “achieving technological advancement.” However, it does not include items such as social sciences or humanities, marketing and sales, mining and prospecting activities and routine testing or data collection.
The notice pointed out that basic and applied research needed to be used specifically as a gateway to research and development for the purposes of determining SR&ED eligibility.
According to the notice, “experimental development is the attempt to achieve technological advancement in the context of creating new or improving existing materials, devices, products or processes. On the other hand, basic and applied research are undertaken to advance scientific knowledge.”
When seeking to outline technological advancement, the notice in part used this definition:
“In experimental development, a technological advancement is sought for the purpose of creating new or improving existing materials, devices, products or processes. It is important to note that the definition of experimental development does not refer to the success or the failure of the systematic investigation or search. The law only requires an attempt to achieve a technological advancement.”
This article is based upon a Government of Canada notice issued at the time: Recognizing Experimental Development.