Under the Scientific Research and Experimental Development (SR&ED) program, the Canada Revenue Agency (CRA) allows businesses to claim tax incentives for work that systematically investigates or experiments to achieve technological advancement. It’s not just about lab research—much of what qualifies happens in regular businesses solving tough technical problems.
Here’s a breakdown of what’s eligible under the SR&ED program:

✅ Eligible Work (Activities)

1. Experimental Development (More than 95% of SR&ED claims)
Efforts to achieve technological advancement for creating or improving materials, devices, products, or processes.
Example: Building a custom software system that pushes the limits of current tech or automating a process in a novel way.
2. Applied Research
Work undertaken to gain scientific knowledge with a practical application.
Example: Testing a new chemical compound for use in a new manufacturing process.
3. Basic Research
Work done to advance scientific knowledge without a specific practical application.
Example: Conducting experiments to understand fluid dynamics in general.
4. Support Work
Work that directly supports the above, such as engineering, design, data collection, testing, or programming.
Must be commensurate with eligible core work.

✅ Eligible Costs (Expenditures)

• Salaries and Wages for employees involved in eligible SR&ED work
• Subcontractor Fees for third parties performing eligible SR&ED activities
• Materials Consumed or Transformed in the course of the SR&ED
• Overhead and Administrative Costs (using the proxy method @ 55% labour cost)

In today’s fast-moving, tech-driven economy, staying competitive isn’t just about keeping up—it’s about leading innovation. For small and medium-sized businesses (SMBs), this can feel like a tall order, especially when resources are tight and every dollar counts. That’s where the Scientific Research and Experimental Development (SR&ED) program steps in—and it may just be the best-kept secret to growth and sustainability in the Canadian business landscape.

• Why SR&ED Matters for SMBs
Larger companies might have dedicated SR&ED budgets, but small and mid-sized businesses often innovate out of necessity—whether it’s building proprietary tools, automating manual workflows, or tackling unique customer challenges. The SR&ED program helps these companies offset the cost of that innovation by refunding a portion of wages, subcontractor fees, materials, and overhead used in SR&ED work.
For eligible private Canadian-controlled companies, this refund can be as high as 64% of qualifying expenditures. That’s not just a tax break—it’s a critical source of working capital.

• Innovation is Not Optional—It’s Survival
Markets are evolving faster than ever. Companies that fail to invest in innovation risk becoming obsolete. Whether it’s new software, smarter systems, or more efficient operations, innovation is no longer a “nice to have”—it’s the price of admission to today’s market. By tapping into SR&ED, SMBs can reinvest into SR&ED, accelerate product development, and bring new solutions to market faster—all without taking on additional financial risk.

• Technology and Finance Go Hand-in-Hand
Staying on the cutting edge isn’t just about having the best tools—it’s about having the financial agility to adopt and develop those tools. The SR&ED program creates a cycle where businesses are rewarded for trying new things. This means less hesitation to take technical risks, which ultimately leads to greater rewards—technologically and financially.