24 January 2024

The Scientific Research & Experimental Development (SR&ED) program is currently the most important innovation support program of the Government of Canada, offering more than 3 million dollars to more than 17,000 candidates each year; understanding its eligibility and mode of operation is essential to knowing and recognizing what type of work and companies can join the program.

According to the Income Tax Act, the SR&ED is defined as “systematic investigation or search that is carried out in a field of science or technology by means of experiment or analysis […].” This definition includes a few things:

  • Work must be conducted to advance scientific knowledge or with the aim of achieving technological advancement;
  • Work must be a systematic investigation or research that is carried out in a field of science or technology, with the generation of an idea based on know facts, testing, developing, and obtaining evidences of progress;

These two topics are important for defining and categorizing your projects and its needs. The key to both is the generation of knowledge that promotes understanding of science or technology – and both are eligible.

Also, each company follow known design methods, techniques, procedures, protocols, standards, and other practices, but being systematic is not enough to a work to be classified as eligible for SR&ED. It’s important to distinguish between a systematic approach to carrying out the work and the approach that is a systematic investigation or research required in the SR&ED definition.

The questions about “How” and “Why”

Considering all these points, we can separate five important questions to help defying these exigencies, pointed out as “How” and “Why”:

Why?

  • Was there scientific or technological uncertainty?
  • Was the overall approach adopted aimed at achieving scientific or technological advancement?

How?

  • Have assumptions specifically aimed at reducing or eliminating this uncertainty been made?
  • Was the overall approach adopted consistent with systematic investigation or research, which includes the formulation and testing of hypotheses through experimentation or analysis?
  • Were the hypotheses tested and the results recorded during the work?

Once you have all the necessary questions answered, you can outline what fits – and doesn’t fit – the meaning of SR&ED and decide whether your project can be submitted to the program.

How can we help you?

FI Group is a global tax consultancy that helps industry obtain tax credits and incentives, with more than 1,800 qualified employees, counting on specialists from different fields, committed to supporting companies of all sizes and in all sectors of activities. With our expertise, FI Group specialists can support your company in identifying qualified activities. We specialize in helping companies finance innovation and secure funding for their R&D activities through the comprehensive management of the R&D Tax Credit.