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Filing SR&ED Claims as a Business

The Scientific Research & Experimental Development (SR&ED) tax incentive was established to encourage scientific research and development conducted by businesses of all sizes in Canada. In this blog post, we will explain how SR&ED funding works for businesses, the application process, and what happens after the SR&ED application has been submitted.

How exactly do I raise capital for my business through SR&ED?

SR&ED expenditures* carried on in Canada are accumulated in a "pool" of deductible SR&ED expenditures. The pool allows a claimant the option of deducting the entire amount of SR&ED expenditures available for the year or any portion thereof after certain adjustments. Any unclaimed balance may be carried forward to be claimed in future years.

SR&ED investment tax credit* (ITC) can be earned and then used to reduce the income tax payable. All SR&ED projects are eligible for a minimum ITC of 15% but the percentage can go as high as 35%.

Are there additional research and development (R&D) tax incentives I can apply for?

The SR&ED tax incentive program is both federal and provincial. All provinces except Prince Edward Island offer specific provincial tax credits.

In Ontario, businesses conducting R&D can claim the Ontario Research and Development Tax Credit (ORDTC) and the Ontario Innovation Tax Credit (OITC).

Claimants applying for ORDTC can receive a non-refundable tax credit* of up to 3.5% on applicable expenditures. To apply, claimant must submit T2SCH508 to receive this claim.

The OITC is a refundable tax credit* and allows the claimant to receive up to 8% on tax credit depending on the ratio of R&D expenditures to gross revenue. Claimant must submit T2SCH566 with the T2 Corporation Income Tax Return form to receive this claim.

The following forms can be found at: https://www.canada.ca

What are the required documents to file for SR&ED?

To claim for SR&ED, an income tax return and Form T661 must be submitted. Form T661 will allow the claimant to outline projects details, and calculate SR&ED expenditures qualified for ITC.

Additionally, corporations are required to fill out the T2 Corporation Income Tax Return and Schedule T2SCH31 forms to be co-submitted with their claim.

These are all primary forms required for the claimant to receive SR&ED claims; however, depending on the nature of the expenditure, additional documents may be required. The claimant is strongly advised to review all the necessary paperwork to be submitted. The aforementioned forms can be found at: https://www.canada.ca

When do I need to submit my SR&ED claims by?

Corporations filing for SR&ED claims must submit their application within 18 months after the end of the company’s fiscal year*. 

What happens after I submit my claims?

Once the submission to CRA is complete, applicants may be denied, accepted, or their application may be under review.

Applications that have been accepted will be processed accordingly within 60 calendar days from the date the completed claim has been received.

Applications that have been forwarded for review will be carried out within 180 calendar days from the date the completed claim has been received. Here, the return may be forwarded to a tax service office where technical and financial reviewers will look over the tax return. If the tax return needs an in-depth review by CRA agents, they may visit the applicants’ place of business and will request to speak directly to the personnel involved with filing the SR&ED claims. Under these circumstances, the claimant may be required to provide supporting documents to validate their claim.

If the final verdict made by the CRA is not agreed upon by the applicant, they are given the opportunity to object to the decision made by the CRA. The applicant has up to 90 days post-assessment or reassessment to file for an appeal. This will be mediated by the CRA and the claimant’s representative.

At Felix SR&ED, we accompany you through every step of the way when filing for your claims including the review process. If you are filing for SR&ED and have some questions, contact us at This email address is being protected from spambots. You need JavaScript enabled to view it. for a free consultation on your own claim!

Glossary:

SR&ED Expenditure: these are costs that include salary/wages of workers under the SR&ED project, third-party agreements, contracts, materials, and overhead. Expenditures that cannot be claimed includes costs incurred from acquiring or leasing land/capital property.

SR&ED Investment Tax Credit: a defined percentage of credit that can be used to reduce the amount of tax required for a business organization to pay back to the government.

Income Tax Payable: a current liability owed to the government by a business venture based on its profitability within a 12-month margin.

Non-refundable tax credit: tax credit that allows the taxpayer to reduce their liability to 0. However, any remaining tax credit will be forfeited.

Refundable tax credit: tax credit that reduces the taxpayer’s liability to below 0 and as a result allow them to receive a tax refund on the difference.

Fiscal year: this date will vary across different corporations.