SR&ED Glossary: Key Definitions from the CRA Website

When we started this website in 2010, there was no SR&ED Glossary in existence! Definitions were spread out across dozens of documents making it difficult to navigate – so we built a glossary; however, since that time the CRA (perhaps because of this website?) has finally built a comprehensive glossary.  Below are a few key terms, but the full list is available via the SR&ED Glossary on the Canada Revenue Agency website.

This page has been updated to reflect the changes made in August 2021. 

Analysis / Analyse

Analysis is the detailed examination of information to differentiate the various parts of a whole, determine their attributes, or explain their relationships. It is performed against the background of available knowledge and experience and it involves using tools such as models, graphs, statistics, tables, diagrams, mathematical formulas, and computer programs to express this knowledge or experience. Analysis is an integral part of the systematic investigation or search and it can be used to generate or test a hypothesis.

Beta site testing / Essai bêta sur site

Beta site testing is the testing or validation of a product or process in a customer or an end-user facility or environment. Often, the need for this type of testing arises when the product or process that is being developed cannot be tested in isolation without the full process environment, or in cases where the developer is unable to simulate the specialized environment or conditions required to evaluate the product performance.

While beta site testing is a commonly used term, depending on the industry or technology involved, other terms may be used to characterize the type of testing discussed above. These terms include, for example, field testing, field investigation, field trials, validation, offsite testing, consumer testing, in-situ testing, end-use testing, final verification, or on-orbit or on-mission testing. The CRA uses the term beta site testing in a generic sense to refer to all of the above terms.

Commensurate with the needs / Proportionnel aux besoins

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 researchapplied research, or experimental development.

Commercial production / Production commerciale

Commercial production is work associated with producing materials, devices, and products, intended for sale or business operations. It is expected that a profit will be made.

The definition of SR&ED states that “work with respect to… the commercial production of a new or improved material, device or product or the commercial use of a new or improved process” is not included in the meaning of SR&ED.

Computer programming / Programmation informatique

Computer programming is preparing and coding operating instructions for a computer.

Data collection / routine data collection / Collecte de données / collecte normale de données

Data collection is the gathering of information using pre-determined procedures or protocols. The term routine data collection refers to data collection that is carried out for supporting normal business operations, and it is excluded from SR&ED work. Only the data collection work that is commensurate with the needs and directly in support of basic researchapplied research or experimental development is eligible.

Directly attributable to the prosecution of SR&ED / Directement attribuable à des activités de RS&DE

An expenditure of a current nature is directly attributable to the prosecution of SR&ED if it is:

  • the cost of materials consumed or transformed in such prosecution (please refer to the Materials for SR&ED Policy);
  • for an employee who directly undertakes, supervises or supports the prosecution of SR&ED that would be, the portion of salaries or wages incurred, to the extent the amount can reasonably be considered in respect of such prosecution (please refer to the SR&ED Salary or Wages Policy); and
  • for other expenditures that are, an expenditure, or portion of an expenditure, that is directly related to the prosecution of SR&ED and that would not have been incurred if such prosecution had not occurred. For more information on other expenditures (please refer to the SR&ED Overhead and Other Expenditures Policy).

Directly engaged in SR&ED  / Exerce directement des activités de RS&DE

Directly engaged in SR&ED refers to hands on work. Whether an employee is directly engaged in SR&ED is based on the tasks that are performed and not on the job title of the employee. For a list of tasks to be considered as directly engaged, see Table 3 in the T4088, Guide to Form T661 Scientific Research and Experimental Development (SR&ED) Expenditure Claim.

For more information, please refer to section 7.1 of the SR&ED Salary or Wages Policy.

Directly in support / Appuyer directement

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

Directly related to the prosecution of SR&ED  / Directement liée à des activités de RS&DE

To be directly attributable to the prosecution of SR&ED in Canada under the traditional method, an expenditure, or a portion of the expenditure, must first be an expenditure directly related to the prosecution of SR&ED in Canada.

For an expenditure to be considered directly related to the prosecution of SR&ED, the expenditure must connect with (that is, be related to) the SR&ED work, the SR&ED staff, or the machinery/equipment used by staff to perform SR&ED, and there must be no intervening step or intermediary between these elements and the expenditure (that is, directly). In other words, there must be a direct linkage of the expenditure to specific SR&ED work, staff, or machinery/equipment. Whether an expenditure is directly related to the prosecution of SR&ED is a question of fact.

If the expenditure is directly related to the prosecution of SR&ED in Canada and also incremental to such prosecution, it can be claimed as SR&ED overhead and other expenditures.

For more information, please refer to section 3.1 of the SR&ED Overhead and Other Expenditures Policy.

Engineering / Travaux de génie / ingénierie

Engineering is the practice of designing, composing, evaluating, advising, reporting, directing, or supervising the construction or manufacturing of tangible products, assemblies, systems, or processes that require in-depth knowledge of engineering science and the proper, safe, and economic application of engineering principles.

By definition, and according to sound professional practice, engineering practice does not involve scientific or technological uncertainty and is thus not eligible on its own. However, engineering work that is commensurate with the needs and directly in support of basic research, applied research, or experimental development is eligible.

It is important to distinguish between work with respect to engineering and the work that engineers perform. Even though engineering practice is not eligible on its own, engineers can still be carrying out basic research, applied research, and experimental development.

Experiment / Expérimentation

An experiment is the test of a hypothesis under controlled conditions.

Experimental development / Développement expérimental

Experimental development is work undertaken for the purpose of achieving technological advancement for the purpose of creating new, or improving existing, materials, devices, products or processes, including incremental improvements thereto.

Experimental production / Production expérimentale

Experimental production is defined as the production output of experimental development that is required to verify whether the objectives of the SR&ED work have been met or if a technological advancement is achievable. The purpose of the production run, in which the output is experimental production, is to evaluate the technical aspects of the SR&ED project.

Hypothesis / Hypothèse

A hypothesis is an idea, consistent with known facts, that serves as a starting point for further investigation to prove or disprove that idea.

Key individuals / Personnes clés

Key individuals are individuals who are directly involved in the project and are essential to the progress of the project. These are individuals who will have a good understanding of the scientific or technological aspects of the project.

Prototype / Prototype

A prototype is an original model on which something new is patterned and of which all things of the same type are representations or copies. It is a basic experimental model that possesses the essential characteristics of the intended product. A prototype is normally understood to be a trial model or preliminary version. It is developed to test the feasibility of a concept or hypothesis within a systematic investigation or search and generally has no lasting value.

For more information, please refer to the SR&ED while Developing an Asset Policy.

Qualified individuals / Personnes qualifiées

Qualified individuals are personnel who have qualifications and/or experience in sciencetechnology or engineering. The qualifications and experience must be relevant to the science or technology involved in the projects claimed.

Quality control / Contrôle de la qualité

Quality control is the techniques and work that sustain the quality of a product or service to satisfy given requirements.

Quality control consists of data collection, data analysis, and implementation, and applies to all phases of the product life cycle: manufacturing, delivery and installation, and operation and maintenance.

Quality control is usually concerned with the functional merits of a material, device, product (for example, conformity to design specifications, including defining testing procedures and minimum quality standards), or process (for example, determining what changes must be made to achieve or maintain the required level of quality).

Work with respect to quality control is specifically excluded from the definition of SR&ED.

Scientific or technological advancement / scientific advancement / advancement of scientific knowledge / technological advancement / Avancement scientifique ou technologique / avancement scientifique / avancement des connaissances scientifiques / avancement ou progrès technologique

Scientific or technological advancement is the generation or discovery of knowledge that advances the understanding of science or technology.

This definition encompasses the definition of scientific advancement, advancement of scientific knowledge and technological advancement. The only difference is that scientific advancement and advancement of scientific knowledge relate to science whereas technological advancement relates to technology.

For more information, please refer the Guidelines on the Eligibility of Work for SR&ED Tax Incentives.

Scientific or technological knowledge base / Base de connaissances scientifiques ou technologiques

Scientific or technological knowledge base refers to the existing level of technology and scientific knowledge and consists of the knowledge of the resources within the company and sources available publicly.

The resources within the business include both:

  • its personnel’s scientific or technological knowledge, education, training, and experience;
  • its technical capabilities typified by its current products, techniques, practices, and methodologies (for example, trade secrets and intellectual property).

Publicly available sources could include:

  • scientific papers;
  • journals;
  • textbooks;
  • internet-based information sources;
  • expertise accessible to the business (for example, through suppliers, recruiting employees or hiring consultants or contractors).

The scientific or technological knowledge base may vary from business to business because:

  • their internal resources are different;
  • some of the public sources of knowledge may not be reasonably available to all businesses.

Scientific or technological uncertainty / scientific uncertainty / technological uncertainty / Incertitude scientifique ou technologique / incertitude scientifique / incertitude technologique

Scientific or technological uncertainty means whether a given result or objective can be achieved, or how to achieve it, is unknown or uncertain due to an insufficiency of scientific or  technological knowledge.

This definition encompasses the definition of scientific uncertainty, and technological uncertainty. The only difference is that scientific uncertainty relates to science whereas technological uncertainty and technological obstacle relate to technology.

For more information, please refer to the Guidelines on the Eligibility of Work for SR&ED Tax Incentives.

Scientific research and experimental development (SR&ED) / Recherche scientifique et développement expérimental (RS&DE)

SR&ED is defined for income tax purposes in subsection 248(1) of the ITA as follows:

“‘scientific research and experimental development’ means systematic investigation or search that is carried out in a field of science or technology by means of experiment or analysis and that is

(a) basic research, namely, work undertaken for the advancement of scientific knowledge without a specific practical application in view,

(b) applied research, namely, work undertaken for the advancement of scientific knowledge with a specific practical application in view, or

(c) experimental development, namely, work undertaken for the purpose of achieving technological advancement for the purpose of creating new, or improving existing, materials, devices, products or processes, including incremental improvements thereto,

and, in applying this definition in respect of a taxpayer, includes

(d) work undertaken by or on behalf of the taxpayer with respect to engineering, design, operations research, mathematical analysis, computer programming, data collection, testing or psychological research, where the work is commensurate with the needs, and directly in support, of work described in paragraph (a), (b), or (c) that is undertaken in Canada by or on behalf of the taxpayer,

but does not include work with respect to

(e) market research or sales promotion,

(f) quality control or routine testing of materials, devices, products or processes,

(g) research in the social sciences or the humanities,

(h) prospecting, exploring or drilling for, or producing, minerals, petroleum or natural gas,

(i) the commercial production of a new or improved material, device or product or the commercial use of a new or improved process,

(j) style changes, or

(k) routine data collection;”

Social sciences / Sciences sociales

Social sciences are disciplines characterized by their concern with human beings, their culture, and their economic, political, and social relationships with the environment.

Generally, the social sciences include anthropology, economics, political science, psychology, sociology, and sometimes education, law, philosophy, religion, and history. Management is also considered a social science.

Work with respect to research in social sciences is specifically excluded from the definition of SR&ED. However, under certain circumstances, work with respect to psychological research may be eligible.

Specified Employee / Employé déterminé

A specified employee is an employee who does not deal at arm’s length with the employer or who is a specified shareholder of the employer. A specified shareholder is a person who owns, directly or indirectly, at any time during the year, 10% or more of the issued shares of any class of the capital stock of the employer or of any corporation related to the employer. A specified employee could also be someone related to a specified shareholder; e.g. a sister, a brother, a spouse, etc.

For more information, please refer to the SR&ED Salary or Wages Policy.

Style change / Modification de style

A style change is a change in the physical appearance or arrangement of an article without altering its utility, efficiency, function, or operating characteristics.

Work with respect to style changes is specifically excluded from the definition of SR&ED.

Support work / Travaux de soutien

The work identified in paragraph (d) of the definition of SR&ED is usually referred to as support work. Work with respect to the eight categories listed in paragraph (d) does not constitute SR&ED on its own. However, if it is commensurate with the needs and directly in support of basic researchapplied research or experimental development work undertaken in Canada, it falls within the meaning of SR&ED.

System uncertainty / Incertitude systémique

System uncertainty is a form of technological uncertainty that can arise from or during the integration of technologies, the components of which are generally well known. This is due to unpredictable interactions between the individual components or sub-systems.

Systematic investigation or search / Investigation ou recherche systématique

The systematic investigation or search called for in the definition of SR&ED is an approach that includes defining a problem, advancing a hypothesis towards resolving that problem, planning and testing the hypothesis by experiment or analysis, and developing logical conclusions based on the results.

For more information, please refer to the Guidelines on the Eligibility of Work for SR&ED Tax Incentives.

Technology / Technologie

Technology is the practical application of scientific knowledge and principles.

While technology can be represented in physical form (patents, procedures, design documents, manuals, etc.), it is not a physical entity. It is the knowledge of how scientifically determined facts and principles are embodied in the material, device, product, or process.

Testing / routine testing / Mise à l’essai / mise à l’essai normale

Testing is the application of procedures designed to observe, measure, or verify attributes, properties, or performance. The term routine testing refers to testing performed during the course of normal business operations, for example, testing carried out primarily to determine user acceptance, suitability, marketability, or competitive assessment. Work with respect to routine testing is specifically excluded from the definition of SR&ED. Only the testing work that is commensurate with the needs and directly in support of basic research, applied research or experimental development is eligible.

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