SR&ED Statistics
Analysis of SR&ED Reporting
Find a comprehensive analysis of SR&ED refunds from 2006 to 2024, along with SR&ED statistics, data tables, and graphs to help you better understand the evolution of SR&ED in Canada.
Summary Table (2005-2024)
| FISCAL YEAR START (MAY 1) | FISCAL YEAR END (APRIL 30) | REFUND ($B) | # OF APPLICANTS | REFUND AVERAGE PER APPLICANT* | SOURCE |
|---|---|---|---|---|---|
| 2005 | 2006 | $ 1.80 | |||
| 2006 | 2007 | $ 3.00 | 22,370.00 | $ 134,108.18 | SRED Stakeholder |
| 2007 | 2008 | $ 4.00 | 18,000.00 | $ 222,222.22 | SRED Stakeholder |
| 2008 | 2009 | $ 4.00 | 18,000.00 | $ 222,222.22 | SRED Stakeholder |
| 2009 | 2010 | $ 3.30 | 28,518.00 | $ 115,716.39 | SRED Stakeholder |
| 2010 | 2011 | $ 3.50 | 21,000.00 | $ 166,666.67 | SRED Stakeholder |
| 2011 | 2012 | $ 3.60 | 23,000.00 | $ 156,521.74 | SRED Stakeholder |
| 2012 | 2013 | $ 3.60 | 28,140.00 | $ 127,931.77 | SRED Stakeholder |
| 2013 | 2014 | $ 3.30 | 25,312.00 | $ 130,372.95 | SRED Stakeholder |
| 2014 | 2015 | $ 3.10 | 24,302.00 | $ 127,561.52 | SRED Stakeholder |
| 2015 | 2016 | $ 3.00 | 22,839.00 | $ 131,354.26 | SRED Stakeholder |
| 2016 | 2017 | $ 2.70 | 22,839.00 | $ 118,218.84 | SRED Stakeholder |
| 2017 | 2018 | $ 3.20 | 19,855.00 | $ 161,168.47 | SRED Stakeholder |
| 2018 | 2019 | $ 3.20 | 19,632.00 | $ 162,999.19 | SRED Stakeholder |
| 2019 | 2020 | $ 3.10 | 19,595.00 | $ 158,203.62 | SRED Stakeholder |
| 2020 | 2021 | $ 4.30 | 19,783.00 | $ 217,358.34 | SRED Stakeholder |
| 2021 | 2022 | $ 3.30 | 20,317.00 | $ 162,425.55 | Canada Revenue Agency |
| 2022 | 2023 | $ 3.60 | 20,079.00 | $ 179,291.80 | Canada Revenue Agency |
| 2023 | 2024 | $ 4.20 | 21,537.00 | $ 195,013.23 | Canada Revenue Agency |
*Calculations by the SR&ED Education and Resources team. 12
SR&ED Statistics
2023-2024 at a Glance
The top five fields for Investment Tax Credits (ITCs) have remained consistent over the last three reporting periods, with Software Development, Electrical Engineering, and Mechanical Engineering leading the way. These fields have continued to dominate in terms of the percentage of ITCs claimed.
The ITCs claimed by the Software Development field for the 2023-2024 period accounted for 39.3% of the total ITCs claimed, equating to 1.72 billion CAD.
This marks a significant increase compared to previous years:
- In 2022, Software Development represented 35.7% of the total ITCs claimed.
- In 2023, Software Development accounted for 34.9% of the total ITCs claimed.
| Field of Science | % of Total ITCs 2023-2024 | % of Total ITCs 2022-2023 | % of Total ITCs 2021-2022 |
|---|---|---|---|
| Software development | 39.30% | 34.9% | 35.70% |
| Electrical engineering | 15.60% | 21.0% | 18.00% |
| Mechanical engineering | 12.30% | 13.6% | 14.50% |
| Medical science and engineering | 11.60% | 11.7% | 11.50% |
| Chemistry or chemical engineering | 7.30% | 6.3% | 8.00% |
| Materials engineering | 6.40% | 4.7% | 4.50% |
| Earth sciences - environmental | 3.00% | 3.8% | 3.50% |
| Agricultural science | 2.20% | 1.7% | 1.90% |
| Food processing | 1.60% | 1.4% | 1.50% |
| Civil engineering | 0.60% | 0.9% | 0.80% |
| Other or not available | 0.10% | 0.0% | 0.00% |
The graph below shows the percentage of investment tax credits allowed based on gross income of business for the 2023-2024 period. 32% of credits allowed go to small businesses that make less than $4 million; 22% of credits allowed go to small to medium-sized businesses that make $4 million to $20 million; 20% of credits allowed go to medium-sized businesses that make $20 million to $250 million; and, 26% of credits allowed go to large businesses that make more than $250 million. Although, 64% of total processed claims were from small businesses, the percentage of total Investment Tax Credits (ITCs) allowed based on gross income for small businesses is 32%, which suggests that while small businesses file a significant number of claims, the amount of ITC granted to them represents a smaller portion of the total credits distributed.
2022-2023 at a Glance
Comparing 2022-2023 period with 2023-2024 period, most of the graphs show the same behaviour during both periods. However, the ITC Claimed VS Allowed and the percentage of total ITCs allowed based on gross income of business are different.
During the 2022-2023 period, the amount of ITCs claimed exceeded the ITCs allowed by $200 million ($3.8 billions claimed and $3.6 billions allowed).
The graph below illustrates the distribution of investment tax credits (ITCs) by business income level for the 2022–2023 period. Of the total credits allowed, 32% went to small businesses earning less than $4 million, 22% to small-medium businesses ($4–20 million), 20% to medium-sized businesses ($20–250 million), and 26% to large businesses earning over $250 million.
Compared to the 2023–2024 period, the share of ITCs received by large businesses increased from 20% to 26%, while medium-sized businesses saw a decline from 26% to 20%.
SR&ED Funding Amounts (2005-2024)
Starting in Fiscal Year (FY) 2013 (April 1, 2013 – March 31, 2014) the amount of CRA tax assistance for SR&ED began steadily decreasing. Thus, the program saw a decrease from $3.6 billion down to $3.3 billion (an 8.3% decrease) in 2013, and a further decrease of $200 million (a 6.1% decrease) in 2014. The figure reported in the 2015 Departmental Performance Report is vague as it states the “program provided more than $3 billion in investment tax credits.” 12 Therefore, if the program provided exactly $3 billion in support, the funding drop in 2016 would be 10%; however, if the program provided $3.1 billion in 2015 (to match 2014), then the funding would have decreased by 12.9% in 2016, when only $2.7 billion was provided.
Although 2016 saw the lowest amount of funding offered since 2005 ($2.7 billion in 2016 and $1.8 billion in 2006), the 2016-2017 period did not see recipients of SR&ED receive the lowest amount since 2005.
SR&ED recipients in 2014 saw the lowest average funding amount provided per claimant, between 2005 and 2016. However, again, although this was the lowest individual payment, this was only $5,535 less than the average amount claimed in 2013. The 2009-2010 period was the year with the biggest difference between the total amount given to the SR&ED program, and the highest drop in individual claims. Between the 2008-2009 and the 2009-2010 period the average amount provided to individual claimants dropped by over $65,000, from $222,222 in 2008, to $157,142 in 2009.
The reduction in overall funding for the SR&ED program was also noticed by industry group, Canadian Advanced Technology Alliance (CATA), which, in July 2017, published an article that suggested the Canadian government had been “quietly chopping billions of dollars” from the SR&ED program between 2009 and 2016.13
The changes announced in the 2012 Federal Budget, which relate to the following dates of introduction could have contributed to the reduction in SR&ED payments:
- January 1, 2013: Contract Payments reduced to 80% of the paid value.14
- January 1, 2013: Proxy overhead calculations reduced to 60% from 65%.15
- 2014: All capital expenditures incurred during the 2014 fiscal period will not be eligible for SR&ED.16
- January 1, 2014: Proxy overhead calculations reduced to 55% from 60%.17
- January 1, 2014: General SR&ED refundable credit reduced to 15% from 20%.18
In the CATA article the CRA, although they give no formal comment, suggest that legislative changes in 2012 made the program more cost effective,19 in response to “aggressive positions taken by claimants in their credit applications” that included inflated expenditures. The CRA stated that this led the CRA to spend more money on compliance, which, in turn, reduced the amount paid out in tax credits to support research and development (R&D) activities.20 We discuss compliance and non-compliance in more detail below.
The table shows that the amount of SR&ED program funding offered by the government grew dramatically between 2016 and 2017, with a gain of 18.5%. The funding available to the program increased from $2.7 billion to $3.2 billion. Between 2017 and 2020 the funding remained fairly stable around $3.2 billion with a slight drop to $3.1 billion in 2020. 2021 showed the most dramatic increase in funding to date when the funding increased by an astounding 43.3%, from $3.1 billion to $4.3 billion. The surprising leap in funding can likely be linked in part to the changes announced in the 2019 Federal Budget which repealed the use of taxable income as a factor in determining a CCPCs annual expenditure limit for the purposes of the enhanced SR&ED tax credit.21 As a result, small CCPCs would be able to benefit from unreduced access to the enhanced refundable SR&ED credit regardless of their taxable income, which resulted in a sudden increase of SR&ED funding provided at the federal level.
Based on the SR&ED statistics above, although there was a 23% reduction in SR&ED refunds between 2021 and 2022, there has been a steady increase in the following years.
Number of SR&ED Claimants (2007 – 2024)
2012 Federal Budget
Improvements include:
- Increasing the number of technical reviewers.
- Providing additional training and establishing coordinated technical support for the technical reviewers
- Devoting more time to program services.
- Enhancing the quality assurance methodology
- Reviewing dispute resolution procedures to ensure their effectiveness.
In addition, the CRA consolidated and clarified the administrative policies that are currently contained in about 70 documents pertaining to the SR&ED tax incentive program. The revised information was presented in a more user-friendly format on the CRA website in December 2012, with the objective of reducing complexity and improving accessibility.24
2013 Federal Budget
The Canada Revenue Agency will also receive new funding of $15 million over two years to focus more resources on reviews of SR&ED program claims where the risk of non-compliance is perceived to be high and eligibility for the SR&ED program unlikely. The Canada Revenue Agency will also more frequently apply penalties for false statements or omissions, where appropriate. In addition, in order to enable better risk assessment, SR&ED program claim forms will be revised to require more detailed information. To enforce this new requirement, Economic Action Plan 2013 proposes that a new penalty be applied in instances where the new required information is missing, incomplete, or inaccurate.25
The changes announced in the 2012 and 2013 budgets focussed on non-compliance and reviews, as a result of pressure from the media and the Jenkins Report released in 2011. However, the changes also meant a dramatic decrease in potential tax credits for a lot of taxpayers, especially those who relied on capital expenditures, direct labour and arms-length contractors.26 The 2017-2018 period saw the second largest drop in claimants by 2,984, from 22,839 to 19,855, which has been attributed to an increase in reviews. In July 2017 the Canadian Advanced Technologies Alliance (CATA) reported that the CRA has a “change rate target” for SR&ED reviews of 75%, which means that the CRA “aims to detect non-compliance in 75% of their reviews.” 27 This suggests that as the CRA wish to change 75% of SR&ED claims that they review, which could have led to “many companies [being] turned off the program due to the recent harsh reviews [conducted in 2017] by [the] CRA.”28
Based on the SR&ED statistics above, the years following the 2017-2018 period have shown a steady number of applicants, averaging 20,157 applicants per year.
SR&ED “Non-Compliance” Reporting
In the 2012-2013 period, CRA reports began including the amount recovered due to “non-compliance,” this was also reported in 2013 and 2014 (shown below with the most recent first):
- 2014-2015: “The CRA identified over $394 million in non-compliance.” 29
- 2013-2014: “The CRA identified over $534 million in non-compliance.” 30
- 2012-2013: “The CRA identified $404 million in non-compliance, compared to $424 million in 2011-2012.”31
After 2015, in the Departmental Performance Reports, non-compliance is not reported on specifically for SR&ED, and instead highlights other sectors such as construction, tax evasion and aggressive tax avoidance.
Other Items: One-time Reports
Federal Expenditures – Concepts, Estimates and Evaluations 2021: Part 8 Report
Part 8 of the 2021 Report on Federal Tax Expenditures discusses the effectiveness of Canada’s Scientific Research and Experimental Development (SR&ED) tax incentives in promoting business R&D using data between 2000 and 2016. The SR&ED program offers tax credits for eligible R&D expenditures, with enhanced rates for small businesses. Research suggests that these incentives, especially for small firms and those in the manufacturing sector, effectively encourage additional R&D spending. However, the responsiveness of R&D activities to tax incentives remains a subject of ongoing research, examining factors like changes in tax rates and the user cost of capital. ” 32
SR&ED Statistics – Trends (2000-2016)
SR&ED Expenditures and Number of Firms Claiming SR&ED Tax Credits in Canada, 2000-2016.
Businesses claimed $13.6 billion in SR&ED expenditures in 2016, a 30% decline from the peak of nearly $19.6 billion in 2001. Over this period, there was an 18% decline in reported SR&ED expenditures, with the decline taking place mostly after 2005. Between 2005 and 2016, reported SR&ED expenditures by businesses fell each year at an average annual rate of 2.9%.
Over 21,000 firms, including about 17,000 small firms, claimed SR&ED expenditures in 2016. This is about 80% higher than the number of firms (about 11,800) claiming in 2000. Although the number of firms claiming SR&ED expenditures increased overall between 2000 and 2016, a significant decline was observed after the 2008-09 financial crisis. After reaching a peak of about 27,500 firms in 2009, the number of firms claiming the SR&ED tax credit has fallen every year, declining by 23% between 2009 and 2016. ” 34
The above graphs represent the SR&ED claimant counts and expenditures by firm size. Claimant numbers grew for both small and large firms in the early years of the sample, then declined 25% and 17% from their peaks in 2010 and 2007, respectively. However, there was still a net increase of 96% and 35% in the number of small and large claimants over the sample period. SR&ED expenditures, for their part, grew by 44% for small firms but declined by 29% for large firms. The decline was fairly stable for large firms over the whole sample period, while for small firms SR&ED expenditures followed the trend exhibited in the number of claimants: after reaching a peak of about $4.9 billion in 2009, claimed SR&ED expenditures by small firms fell each year, declining by 28% between 2009 and 2016. Thus, the decline in the total number of claimants (in Chart 1) can largely be attributed to the decrease in the number of small firms while the decline in expenditures was driven by large firms. This primarily reflects their relative proportions, with small firms representing 80% of the claimants, on average, while large firms accounted for 77% of overall expenditures over the sample period. ” 37
SR&ED Expenditures by Industry, 2016 SR&ED Expenditures and Number of Firms Claiming SR&ED Tax Credits in Canada, 2000-2016.
The pie chart above presents the distribution of claimed SR&ED expenditures by industry in 2016. Almost 70% of overall SR&ED expenditures were claimed by businesses from the manufacturing sector (40%) and the professional, scientific, and technical services sector (30%), while an additional 20.6% was shared almost equally by information and cultural industries and transportation, warehousing, wholesale and retail trade. ” 39
The graph above decomposes claimed total 2016 SR&ED expenditures by industrial classification between small and large businesses. The manufacturing sector accounted for the largest share (43%) of SR&ED expenditures claimed by large firms while the professional, scientific and technical services sector made up an additional 25%. On the other hand, 46% of claimed SR&ED expenditures by small firms were in the professional, scientific and technical services sector, while manufacturing accounted for about 28% of their overall claimed SR&ED expenditures. ” 41
R&ED Expenditures by Province, 2000-2016 SR&ED Expenditures and Number of Firms Claiming SR&ED Tax Credits in Canada, 2000-2016
The above graph presents the distribution of claimed SR&ED expenditures by businesses from different provinces over the period of 2000 to 2016. In most provinces, eligible expenditures follow the federal definition, with an additional requirement that the R&D is performed in the province. Therefore, where possible, claimed SR&ED expenditures for businesses reporting activities in multiple jurisdictions were allocated using the amount of expenditures eligible for the provincial tax credit. Moreover, in some cases corporations have permanent establishments in that province, which is informative in allocating federally eligible expenditures. However, the Canada Revenue Agency does not administer Quebec or Alberta tax credits, and only began administering Ontario’s R&D tax credits in 2009. Where provincial tax credit amounts are not available, then, claimed SR&ED expenditures were allocated according to the provincial distribution of the corporation’s taxable income. As it is not possible to know in which province the R&D is performed using SR&ED claims in these cases, this allocation rule may under or overestimate the R&D expenditures in some provinces. Firms with activities in multiple jurisdictions represent on average 8% of the firms included in the sample, and 44% of overall SR&ED expenditures. ” 43
Staffing
The 2013-2014 Annual Report to Parliament, reports that the financial resources allocated to the SR&ED program went beyond $74 million dollars and the number of employees exceeded 600.44
Staffing and resources information, specific to the SR&ED program, was not reported on in any other the Annual Reports or Departmental Performance Reports after 2013.
Fiscal Impact
The 2016-2017 report is the only report that includes a figure to establish the “dollar fiscal impact” of the SR&ED program, which it reports as “$349 million.” 45
This may be the first of many reports on the dollar fiscal impact of the SR&ED program due to calls by the media since 2000 46 to publish figures on how much monetary wealth the SR&ED program generates.
Conclusion
In the 2016-2017 period, Canada’s income from taxation was over $244 billion.47 As $2.7 billion was provided in funding for the SR&ED program, this equated to only 1.1% of Canada’s income. Academics from the University of Western Ontario stated in a report that the “reduction in real federal spending on scientific research and development [R&D] [between 2010 and 2015], which has been particularly marked in the case of intramural spending, has no efficiency justification.” 48 Additionally, CATA claim that “the report of the Jenkins Expert Panel on Federal Support to R&D was stated to have been the basis for these reductions in the [SR&ED] program” 49 and continues to call for the CRA to begin tracking and reporting on the effectiveness of its research and development programs.50
Although the Annual Reports to Parliament and the Departmental Performance Reports used to state the obviously quantifiable aspects of the SR&ED program (e.g. the amount of government funding the program receives and the amount of taxpayers who file claims for the tax credit), these documents could provide more information on how effective the SR&ED program is in terms of the value of the R&D funded. R&D value was published in 2011 by a think-tank that reported every dollar spent on R&D, generated a further R&D value of $1.38,51 and then briefly in the 2016-2017 Departmental Performance Report. 52 This information accompanied by a clear and consistent report of other quantifiable aspects of the SR&ED program would provide enough information to accurately analyze the program and support its longevity.