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How to Claim SR&ED Tax Credits

The Scientific Research and Experimental Development (SR&ED) program is a valuable tax incentive designed to encourage Canadian businesses to innovate and invest in research and development activities. If your business is conducting scientific or technological R&D, it’s crucial to understand how to claim and maximize SR&ED tax credits.

In this guide, we’ll walk you through the eligibility criteria, qualifying work, and the step-by-step process for claiming SR&ED tax credits.

Determine Your Eligibility

To be eligible for SR&ED tax credits, a company must be a:

  • Canadian-controlled private corporation (CCPC)
  • Public corporation and trust
  • A member of a partnership

Additionally, the company must also be involved in scientific research and experimental development activities aimed at creating new or improving existing technologies, products, or processes.

Identify Qualifying Work

To qualify for SR&ED tax credits, you must be engaged in one or more of the following:

  • Basic research: Conducting work to advance scientific or technological knowledge without any specific practical application in view
  • Applied research: Conducting work to advance scientific or technological knowledge with a specific practical application in view
  • Experimental development: Conducting work to achieve technological advancement for the purpose of creating new or improving existing materials, devices, products, or processes, including incremental improvements

Assess Expenditures

Only certain expenditures related to your SR&ED work are eligible for tax credits. These could include:

  • Salaries and wages of employees engaged in SR&ED activities
  • Materials consumed or transformed during the course of the project
  • Subcontractor costs for SR&ED work
  • Third-party payments for SR&ED work
  • Overhead and other expenditures

Ensure that you maintain detailed records of these expenses for the proper calculation and substantiation of SR&ED tax credits.

Determine Your Company’s Status

Different Investment Tax Credit (ITC) rates are applicable depending on whether your company is an SME or a large corporation.

  • Small and Medium-sized Enterprises (SMEs): Typically, Canadian-controlled private corporations (CCPCs) can avail of a refundable 35% ITC rate on the first $3 million of qualified expenditures. Any amount exceeding $3 million is eligible for a 15% non-refundable ITC.
  • Large Corporations: A non-refundable ITC of 15% regardless of the amount of eligible expenditures applies to large corporations, foreign-owned corporations, and public corporations.

Prepare and Submit Your SR&ED Claim

To submit your SR&ED claim, follow these steps:

Seek Professional Guidance

Claiming SR&ED tax credits is a complex process, and as such, it could be helpful to seek the assistance of specialized consultants or tax experts who understand the nuances of the program.

By following these steps and maintaining a strong documentation process, your company can navigate the complexities of the SR&ED program and maximize your tax incentives for eligible R&D work. If you require guidance or support for claiming SR&ED tax credits, our team at G6 Consulting is here to help. 

Get your SR&ED done right with G6 Consulting Inc – Canada’s R&D Tax Credit Experts!

G6 Consulting can work with you to build your claim, co-ordinate with your accountant, submit your claim and get you your cheque. No cost until you get paid

Check out our SR&ED overview page to learn more about SR&ED and how to qualify

Contact an Expert for a free no obligation consultation to see if your business can qualify

Check out our SR&ED calculator to get an idea of how big your SR&ED cheque could be