SR&ED Program: Is Your SME Eligible?
An SME is eligible for the SR&ED (Scientific Research and Experimental Development) program if it carries out activities that seek to resolve technological uncertainty through systematic experimentation. This is not only reserved for technology or research companies: manufacturing SMEs that are engaged in experimental development may be eligible.
Many managers miss out on these important credits because they do not realize that what they do on a daily basis qualifies. This checklist will help you assess your situation.
1. The basic criteria of the SR&ED program (according to the CRA)
The Canada Revenue Agency assesses SR&ED claims based on certain criteria. Your activity must meet each of them to be eligible:
- 1. Scientific or technological objective : you are looking to advance knowledge or achieve technological progress in your field
- 2. Technological uncertainty : you are facing a problem whose solution is not known or obvious
- 3. Technical content : the work requires specialized technical or scientific skills
- 4. Technological advancement : your work aims for an outcome that is beyond your knowledge
- 5. Documentation : Your work is well documented
2. Checklist: do your activities qualify?
Check the statements that apply to your projects from the last 12 to 18 months:
SR&ED Qualifying Indicators
Check each criterion that applies to your projects
If you have checked two or more statements, your SME is potentially eligible for the SR&ED program. The next step is a more in-depth eligibility analysis.
3. Sectors that are often eligible—and often surprised to be eligible—
The SR&ED program is often associated with high technology. In fact, companies in many sectors benefit from it every year:
- Manufacturing and Manufacturing
- Information technology (software, automation, algorithms)
- Agri-food (formulation, preservation, processing)
- Engineering (new materials, innovative methods)
- Life Sciences Pharma
- Environment and Renewable Energy
4. Eligible expenses: what you can claim.
The SRED program allows you to claim a tax credit on several categories of expenses directly related to eligible activities:
- Wages and salaries : employees who work directly on SRED projects
- Subcontracting : contracts awarded to third parties to carry out RD work
- Materials : raw materials used in testing and prototypes
- Overhead (one part): indirect costs related to eligible activities according to the method applied
Conclusion
Many Quebec and Canadian SMEs are doing SRED without knowing it, and without claiming The program is accessible, but the documentation and presentation of the claim require specific expertise.
Progress Tips has been handling hundreds of SRED claims since 2003 with a 98% success rate. If you have ticked any boxes in the checklist above, tell us about your situation. The initial eligibility analysis is free of charge.
FAQs — SRED Eligibility
Can a start-up without profits benefit from the SRED program?
Yes. Canadian-controlled private corporations (CCPCs) have access to a 35% refundable tax credit at the federal level on the first $6 million of eligible expenses, even in a loss situation. Some of them are also covered at the provincial level, depending on the province. This makes it a particularly interesting program for growing companies.
Can an SME make an SRED claim for past years?
Yes. It is generally possible to file an SRED claim for 18 months after the end of the tax year in question. Depending on the situation, it may be advantageous to claim for several years if the eligible activities have not yet been documented.
Does the SRED program apply to SMEs that use foreign suppliers?
Partially. Work performed in Canada by Canadian subcontractors is eligible. Subcontracting abroad is generally excluded. The program aims to encourage RD conducted on Canadian soil.
What is the difference between SRED, SRED and SRED?
These three names refer to the same federal program. SRED and SRED are common French variants. SRED stands for Scientific Research and Experimental Development. The official term used by the CRA in French is SRED.