CRA SRED FormsSR&ED Updates and Changes

SR&ED Updates Q3 2017 (July to September)

Attention: Policies May Have Been Updated 

*** Some of the policies referenced were updated 2021-08-13. We are working to update this article and others. *** 

SR&ED Updates Q3 2017 (July to September)

SR&ED updates from the third quarter (Q3) of 2017.

The most prominent SR&ED updates in Q3 of 2017 have come from the Canada Revenue Agency (CRA) and one Tax Court of Canada ruling that carries a warning for those wishing to claim SR&ED.

SR&ED Updates in Q3 2017

The CRA made substantial administrative changes to its website by merging with an all-government federal site and the agency made significant changes to its Self-Assessment and Reporting Tool (SALT) tool.  

Aside from the CRA’s changes, the third quarter was a relatively silent period for SR&ED news. Whilst important, the Tax Court of Canada uploaded only one judicial proceeding and there was an influx of articles largely culled from smaller online publications coming through at the end of September. What is notable is that there was an absence of stories about SR&ED from the big players in the Canadian media industry.

CRA Policy and Administrative SR&ED Updates 

There were a few policy and administrative updates from the CRA in Q3 of 2017. 

The CRA Website Has Merged with 

This quarter the CRA’s independent website was replaced by the new, all-government website, All of the CRA’s content, including information about the SR&ED program, can now be found on In the near future, most of Canada’s governmental departments and agencies will be merged with the new site, which is modelled on successful all-government portals found elsewhere in the world, such as the United Kingdom’s 

Be sure to update your bookmarks now as redirected links from the old CRA website will stop working at some point.                                                                          

Update to the SR&ED Self-Assessment and Reporting Tool (SALT) 

In August the CRA updated the second step of the Self-Assessment and Reporting Tool (SALT) to reflect the recent changes in provincial tax credits for Manitoba, Ontario, Quebec and Saskatchewan.1

An Updated Summary of Provincial and Territorial R&D Tax Credits 

The CRA has updated its list of provincial and territorial R&D tax credits, complete with links to forms.2 This is a good resource if you are claiming other R&D tax credits other than those at the federal level.  

Relevant Judicial Proceedings 

As noted earlier, there was one Tax Court of Canada ruling during the third quarter of 2017. 

Flavor Net Inc. v. The Queen (2017-09-12) 

This ruling is vital because it shows that Flavor Net Inc. (the Appellant) did not generate a hypothesis. Further, the Appellant also did not properly explain what the “technological uncertainty” was in developing its projects in both its T661 Scientific Research and Experimental Development (SR&ED) Expenditures Claim form and court testimony. 

Essentially, the Appellant develops beverages with plant sterols and other health-food ingredients. One of the projects it was trying to claim SR&ED tax credits for was its development of “a beverage containing a mixture of 800 milligrams of plant sterols in a two-ounce format.”3 Plant sterols have been found to be a natural cholesterol-reducing substance found in plant cell membranes, and the U.S. Food and Drug Administration (FDA) notes that 800 milligrams of sterols taken daily could reduce one’s cholesterol levels, lessening the risk of heart disease.  

The Appellant told the court there were similar products on the market, but it was trying to increase the amount of plant sterols in its product to meet the 800-milligram daily requirement set by the U.S. FDA in a two-ounce shot – which nobody else had done. However, the court sided with the CRA (the Respondent) because the information about this project in the Appellant’s T661 form was “vague.” 4 For instance, the Appellant could not clearly articulate, even in testimony at the court, its hypothesis for this project based on the SR&ED definition: “a hypothesis is an idea, consistent with known facts, that serves as a starting point for further investigation to prove or disprove that idea.” 5 

In the end, the court found that the Appellant had not demonstrated how this project met the definition of “technological uncertainty” in the SR&ED program.  

According to the CRA, technological uncertainty means: 6 

Whether a given result or objective can be achieved or how to achieve it is not known or determined on the basis of generally available scientific or technological knowledge or experience. Specifically, it is uncertain if the goals can be achieved at all or what alternatives (for example, paths, routes, approaches, equipment configurations, system architectures, or circuit techniques) will enable the goals to be met based on the existing scientific or technological knowledge base.

While the court agreed that the Appellant was trying to create a new product, it “used a methodology and a technology that are well established in the food industry, namely high-shear mixing, mechanical pumping, by trying to heat the product at different temperatures and by utilizing emulsifiers that existed in the market.” 7 Thus, the Appellant had not met the criteria for technological uncertainty.  

Another project that the Appellant was trying to claim SR&ED tax credits on was “a pasteurization system that focused on pasteurizing only the active ingredients (of its beverages) by pumping these ingredients in a side kettle and then pumping back the mixture into a larger tank.” 8 This project was also dismissed by the court as the Appellant could not give a firm answer as to which taxation year it had been developed in. However, the court noted that this system “was not materially different from the hot fill process widely used in the beverage industry.” 9

This court case should be a stern reminder to those who wish to claim SR&ED that you must use a scientific method of discovery that includes a hypothesis in the project in question before it has begun and during the experimental process – not after the fact, when one is trying to explain what the project’s hypothesis was in front of a tax court judge.

The T661 form needs to be filled in carefully, and you need to be able to explain your technological uncertainty. Doing otherwise is at your own peril, and opens up the possibility that your claim will be rejected outright by the CRA.  

SR&ED in the News 

What is notable this quarter is that the large national and regional newspapers, such as the Globe and Mail and the National Post, were silent on the issue of SR&ED. This was presumably because there was not much news to report on while the federal government conducts its review of the SR&ED program.  

Smaller business publications featured brief mentions of SR&ED and the program’s effect on larger technology stories that were shaping the news.

9 suggestions from ITAC for the 2018 Canadian budget (IT World Canada, August 8, 2017) 

This technology industry online news source reported that the Information Technology Association of Canada (ITAC) had nine key areas that it was suggesting the federal government look at in its next budget. One of those areas was SR&ED. ITAC recommended that the SR&ED program should be updated to “help small companies scale” and “better align it with R&D cycles in the tech industry.” 10   

For more in-depth information on the recommendations ITAC had for SR&ED, please consult our article “IT Group, ITAC, Wants Changes to SR&ED.”  

White Star Capital Explains Why It’s Bullish on Canada with VC Landscape Report (, September 27, 2017) 

This story from a startup news and technology innovation website notes that international venture capital firm, White Star Capital, was excited about American investors starting businesses in Canada, according to a report they commissioned that looked at our country’s potential.  

The report notes that the federal government’s Innovation Agenda, which includes SR&ED tax credits, among other things, was a factor towards creating a strong Canadian technology ecosystem.11

Investing in the Startups that Invest in Innovation (, September 28, 2017)  

This article pointed to the challenges of claiming an SR&ED tax credit in Canada when discussing a new firm lending support and capital to smaller companies, noting the complexity of filing a tax credit application and the length of time it may take to actually receive the credit: 12 

In Canada, these types of companies (that undertake R&D) are often eligible for what’s called Scientific Research and Experimental Development (SR&ED) tax incentives. This leads to two challenges for such companies: One, tax filing can be more complex for a business to ensure they qualify for these tax breaks. Two, … it can take, on average, 18 months for these tax breaks to actually reach the company.

That said, the article does go on to note that these companies “will eventually receive both tax breaks and revenue from recurring services or sales as the company continues to grow.” 13 The article’s criticism seems valid and is realistic in that companies can generate revenue while waiting for their tax credit to be assessed.  

The Not-So-Secret Advantages of a Canadian Location (, September 29, 2017)  

This article highlighted the positive aspects of opening a new business in Canada and how the SR&ED tax credit can aid in the process: 14 

Canadian governmental entities work hard to create an environment where tomorrow’s ideas can readily rise to the surface and thrive. Just one example of the effort is the Scientific Research and Experimental Development (SR&ED) tax incentive program. Foreign investors that have businesses established in Canada can apply for these incentives that help defray the cost of employees engaged in R&D, materials, overhead, and contract expenditures.

Inside Vancouver Startup Week 2017 (, September 29, 2017)  

Finally, the SR&ED program was mentioned in passing in this news recap about Vancouver Startup Week. The article states that Vancouver has been ranked the No. 1 startup city in the world, according to Forbes magazine, and notes that access to direct and indirect funding (the latter of which the SR&ED tax credit is) at both the federal and provincial levels had helped small businesses in the city.15

After all of the condemnation the SR&ED tax credit program received in Q2 media reports, particularly from the Globe and Mail, it is great to see the program getting some positive press.  

Summary of 2017 Q3 SR&ED Updates 

This quarter saw some big changes in terms of how the CRA promotes the SR&ED program through its website, and if you’re using SALT, you can now be sure the tool will deliver the most up-to-date financial information to you. These updates in Q3 of 2017 to the CRA website are long term, please be sure to update your bookmarks.

Aside from that, things were relatively silent in the courts and in the news – though one should carefully consider the judge’s ruling in Flavor Net Inc. v. the Queen as it may have implications for how you fill out your T661. Additionally, we advise that you look into ITAC’s recommendations, as they may fundamentally impact which companies receive SR&ED in the future – if the federal government implements them.  

With the changes proposed by ITAC in the works, it may just be that the final quarter of 2017 may be a profoundly active and noteworthy one.

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Show 15 footnotes

  1.  Government of Canada. Canada Revenue Agency. (August 11, 2017.) SR&ED Self-Assessment and Learning Tool. Retrieved October 11, 2017 from:
  2.  Government of Canada. Canada Revenue Agency. (October 3, 2017.) Summary of provincial and territorial research & development (R&D) tax credits. Retrieved October 11, 2017 from:
  3.  Government of Canada. Tax Court of Canada. (September 12, 2017.) Flavor Net Inc. v. the Queen.  Retrieved October 11, 2017 from:
  4.  Government of Canada. Tax Court of Canada. (September 12, 2017.) Flavor Net Inc. v. the Queen.  Retrieved October 11, 2017 from:
  5.  Government of Canada. Canada Revenue Agency. (March 30, 2017.) “Hypothesis.” SR&ED Glossary. Retrieved October 11, 2017 from
  6.  Government of Canada. Canada Revenue Agency. (April 24, 2015.) Eligibility of Work for SR&ED Investment Tax Credits Policy. Retrieved October 11, 2017 from:
  7.  Government of Canada. Tax Court of Canada. (September 12, 2017.) Flavor Net Inc. v. the Queen. Retrieved October 11, 2017 from:
  8.  Government of Canada. Tax Court of Canada. (September 12, 2017.) Flavor Net Inc. v. the Queen. Retrieved October 11, 2017 from:
  9. Government of Canada. Tax Court of Canada. (September 12, 2017.) Flavor Net Inc. v. the Queen. Retrieved October 11, 2017 from:
  10. IT World Canada Staff. (August 8, 2017.) 9 suggestions from ITAC for the 2018 Canadian budget. IT World Canada. Retrieved October 11, 2017 from:
  11. Galang, J. (September 27, 2017.) White Star Capital Explains Why It’s Bullish on Canada with VC Landscape Report. Retrieved October 3, 2017 from:
  12. PYMNTS. (September 28, 2017.) Investing in the Startups that Invest in Innovation. Retrieved October 11, 2017 from:
  13. PYMNTS. (September 28, 2017.) Investing in the Startups that Invest in Innovation. Retrieved October 11, 2017 from:
  14. Stackhouse-Kaelble, S. (September 29, 2017.) The Not-So-Secret Advantages of a Canadian Location. Retrieved October 11, 2017 from
  15. Bizzo, G.C. (September 29, 2017.) Inside Vancouver Startup Week 2017. Retrieved October 11, 2017 from

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