SRED examples

Examples of SRED work

It can be tricky to figure out whether a particular job or project constitutes SRED work.  Given the complexity of the topic, looking at examples of SRED work, and other cases which don’t meet the standard of SRED work, can be very helpful.  It turns out the government has given us several SRED and non-SRED examples in this long article, Eligibility of Work for SR&ED Investment Tax Credits Policy.  We summarize the examples and key takeaways here.

Technological uncertainty

You use current technology to extract oil from oilseeds. The by-product after removing the oil is flour and seed coats with some trapped oil, called meal.  You’d like to develop a process to extract the flour from the seeds and oil to produce a product suitable for humans to consume.  One obstacle is that high temperature extraction methods harm the nutritional value and appearance of the flour.  Separating the seeds and flour is difficult because the seed coats and the flour have similar physical properties and because the two are bonded together.

After due diligence, you develop a hypothesis that you can separate the flour from the seeds at low temperature using a process called ultrasonic maceration.  You further think that the oil can be removed by a simultaneous solvent extraction process.  Last, you believe that these separations can be achieved in a continuous process vs current meal processing which is all batch-based.

Technological uncertainty arose because of the limitations of current technology. You could not use the current technology to develop a large-scale, continuous process to separate the seed coats from the protein-rich flour at a low temperature. There was technological uncertainty because you did not know whether you could achieve a specific result or objective or how to achieve it based on generally available scientific or technological knowledge or experience.

Technical (not SRED) vs Technological (SRED)

Technical problem

You are a chemical company developing a new process for a chemical product.  A number of the pumps used in the process began to corrode after only 6 months despite having a rated 10 year life.  You start an analysis to gigure out what is going wrong.  You discover that periodically the pumps are coming into contact with a highly corrosive liquid.  You work backwards/upstream and find that a filter fails under certain high temperature conditions which allows the corrosive material into the system.  You work out a fix for the filters and then no more corrosive materials in the process flow.  Problem solved, no more corroding pumps.

The problem with the pumps in the new process was technical and not technological. You resolved the technical problem—corroding pumps—by identifying the true source of the problem and fixing it with an existing solution.  There is no SR&ED here.

Technological uncertainty

You are the pump supplier. The pumps are designed to work in corrosive environments.  Pumps start to fail after 6 months vs their rated 10 year lifespan.

You investigate and find that the main shaft seal is leaking, causing corrosive fluid to leak into the pump, destroying it.  You replace the main seal and put the pump back into service.  It fails again in 6 months.

You investigated further and found that the temperature of the shafts of the pumps was above the maximum recommended operating temperature of the seal material. This problem caused seal and ultimately pump failure.

Once you discovered the cause of the problem, you started working on understanding the relationship between the sealing material and the seal profiles in a high-temperature, corrosive environment. You wanted to figure out the most suitable seal profile and seal material to achieve a 10-year lifespan. The manufacturers had data on the behaviour and physical properties of the seal materials at much lower temperature ranges, but there was no information or data on their corrosion resistance and physical properties at higher temperatures and in that specific type of environment. Nor was there any information on the profile that would be suitable for the high-temperature, corrosive environment the pumps were going to be used in.

This scenario describes a technological uncertainty, which means your investigation and remedial work are SR&ED.

We’ll have more examples of SRED work in next week’s blog post, More examples of SRED work.

Do you want more information on SRED qualifying work?  Check out this article!