Updated July 2026 — Budget 2025 rules + CRA's new 45-day target

How to claim SR&ED in Canada — the 7 steps, and whether you need a consultant

The full filing process for Scientific Research & Experimental Development tax credits: the 3-part test, Form T661, the 18-month deadline, what CRA actually pays — and a straight answer on when hiring someone is worth the fee and when it isn't.

Start at Step 1 Do I need a consultant?

35%

Refundable rate for CCPCs

$6M

Expenditure limit (Budget 2025)

90%

Of claims accepted as filed

18 mo

To file, then it's gone

Last updated: July 31, 2026 • Researched & verified by GrantCompass

At a Glance Key Facts DIY or Consultant? What Changed in 2026 Step 1: Eligibility Step 2: Documentation Step 3: Expenditures Step 4: Form T661 Step 5: Filing Step 6: CRA Review Step 7: Refund Common Mistakes The Decision Table Three Ways to File Worked Example Where We Fit Sources FAQ

Claiming SR&ED in 2026 — what it pays, and what you actually have to do

Scientific Research and Experimental Development (SR&ED) is Canada's largest business R&D incentive and, unlike a grant, it is an entitlement — you are not competing against other applicants. If the work qualifies and the paperwork holds, you get paid. A Canadian-controlled private corporation receives a 35% refundable investment tax credit on the first $6 million of eligible expenditure per year (raised from $3M by Budget 2025), a maximum enhanced credit of $2.1 million a year. Everyone else claims a 15% basic credit, generally non-refundable. In fiscal 2024–25 the CRA allowed $4.5 billion in credits across 22,758 claims — and accepted 90% of them as filed. This guide walks the whole process in seven steps, then answers the question most people are really here for: whether to file it yourself or pay someone.

What claiming SR&ED actually requires: confirm the work passes CRA's 3-part test (technological uncertainty + systematic investigation + technological advancement), keep records while the work happens rather than reconstructing them later, total your eligible salaries, materials, contractor payments (80% of arm's-length), overhead (proxy = 55% of eligible salaries) and, since Budget 2025, capital equipment; then file Form T661 and Schedule T2SCH31 with your corporate return within 18 months of fiscal year-end. Not selected for review, the refund arrives in about 60 days.

Key Facts: SR&ED Claim Process

35% enhanced refundable rate for CCPCs on the first $6 million of qualified expenditure — a maximum enhanced credit of $2.1 million per year
15% basic rate for everyone else, and for CCPC expenditure above the $6 million limit — generally non-refundable
$6 million expenditure limit — raised directly from $3M by Budget 2025 (there was no $4M step), shared among associated corporations
Capital expenditures are eligible again — equipment acquired after December 16, 2024 and used 90%+ for SR&ED, reversing the 2014 removal
18-month filing deadline after fiscal year-end — absolute, no extensions, no appeal
90% of claims accepted as filed; 6% accepted after modification; 4% denied (CRA, fiscal 2024–25)
~60 days to a refund when a claim is not selected for review — CRA targets 45 days from April 2026 for timely refundable claims; up to 180 days if reviewed
$4.5 billion allowed across 22,758 claims in fiscal 2024–25; software development alone accounts for 40.8% of credits allowed
Proxy method (55%) of eligible salaries is the simplest overhead calculation and needs no extra documentation
80% of arm's-length contractor payments are eligible as subcontractor costs

What a real claim is worth: across all claimants the average credit allowed is roughly $198,000, but that average is pulled up by a small number of very large claimants. For businesses under $4 million in revenue the average is about $102,000, and the typical SME claim lands in the $50,000–$300,000 range. If a pitch quotes you a seven-figure number as though it were normal, it isn't.

Do you need an SR&ED consultant?

The straight answer, before the seven steps — because it changes how you read them.

Verdict · the common case

If your R&D is a normal part of how you build, your records already exist in real time, and your claim is in the tens of thousands — self-file with your accountant. CRA accepted 90% of SR&ED claims as filed in fiscal 2024–25 and denied 4%. A contingency fee is priced on your refund, not on the work: at 20%, a $60,000 refund costs $12,000 and a $200,000 refund costs $40,000 — for a filing that is not four times harder.

Verdict · when to hire

If your eligibility is genuinely arguable, you have been reviewed before, or nobody internally can write the Part 6 technical narrative — hire a consultant, and it will be the best money you spend all year. The variable that should move the decision is how contestable your claim is, not how big it is. Defending a claim under CRA review is adversarial technical work, and experience is worth paying for.

What a contingency fee costs at commonly quoted rates

Your refund	Fee at 15%	Fee at 20%	Fee at 25%
$60,000	$9,000	$12,000	$15,000
$100,000	$15,000	$20,000	$25,000
$200,000	$30,000	$40,000	$50,000

Illustrative arithmetic only — your own quote governs. Two questions worth asking before you sign: does the percentage apply to the federal credit only or to federal plus provincial, and is audit defence included? Detailed breakdown: what an SR&ED consultant actually costs.

Here's the part nobody selling you either option will mention CRA already knows who prepared your claim. Part 9 of Form T661 requires you to disclose the claim preparer and the fee arrangement — including whether it is contingency-based. Leaving Part 9 out or filling it in incompletely triggers a $1,000 penalty and draws review attention. So the choice between filing yourself and hiring out is not a secret you are keeping from the reviewer; it is a line on the form. Choose on the merits, and if you do hire, ask who signs Part 9.

What's Changed for SR&ED Claims in 2026

Four Budget 2025 rule changes affecting every claim for tax years beginning after December 15, 2024 — plus two service changes that landed in 2026.

Budget 2025 delivered the most significant changes to the SR&ED program in a decade. All four changes apply to tax years beginning after December 15, 2024, meaning most fiscal 2025 and fiscal 2026 claims will be the first to reflect the new rules. Claimants filing for earlier tax years should continue to use the pre-2025 rules for those periods. The changes expand the program in every direction — higher expenditure limit, restored capital eligibility, new pre-claim approval, and wider phase-out thresholds. No existing eligibility rules were tightened.

1. Expenditure limit doubled from $3 million to $6 million. Canadian-Controlled Private Corporations (CCPCs) now receive the enhanced 35% refundable rate on the first $6 million of eligible SR&ED expenditures per fiscal year, up from $3 million. Maximum refundable credit at the enhanced rate is now $2.1 million per year, up from $1.05 million. Expenditures above the $6 million threshold continue to qualify for the standard 15% rate. Source: Canada Revenue Agency, SR&ED Budget 2025 Implementation Notice.

2. Capital expenditures restored as eligible SR&ED expenses. For the first time since 2014, capital property (including specialized equipment used primarily for R&D) is again eligible for the SR&ED investment tax credit. This is a material change for manufacturers, biotech, and hardware-intensive tech companies whose R&D requires equipment purchases. Equipment must be used at least 90% for SR&ED-eligible work during the claim period. Include capital costs on Form T661 in Part 3 alongside salaries, materials, and overhead.

3. Voluntary pre-claim approval, live since April 2026. CRA now offers an elective pre-claim approval process with a 90-day turnaround, giving technical eligibility confirmation up front rather than two years later at review. This is the single most useful change for anyone weighing self-filing against hiring out: "is this even eligible?" is precisely the question a consultant gets paid to answer, and you can now put it to CRA directly before committing to a full claim. The process is opt-in and existing claim procedures remain valid if you skip it. Best suited to first-time claimants and to novel or unusually large projects.

4. Taxable capital phase-out range widened from $10M–$50M to $15M–$75M. The enhanced 35% refundable rate phases out as a CCPC's taxable capital crosses defined thresholds. Pre-Budget 2025, the phase-out began at $10 million in prior-year taxable capital and fully eliminated the enhanced rate at $50 million. The new thresholds shift to $15 million and $75 million respectively, qualifying thousands of additional mid-sized Canadian businesses for the enhanced rate. CCPCs that were just over the prior $50M ceiling should re-check eligibility under the new rules.

5. CRA is paying faster — a 45-day service target from April 2026. For timely-filed refundable claims that are not selected for review, CRA now targets 45 days from filing, against a standing service standard of 60 days. Reviewed claims still run to roughly 180 days. This matters for cash-flow planning — and it invalidates most of the refund-timing guidance published before 2026, including anything a quote is built on.

6. Quebec replaced its R&D credit with the CRIC. For taxation years beginning after March 25, 2025, Quebec's legacy R&D credit is replaced by the CRIC (Tax Credit for Research, Innovation and Commercialization) at 20–30%. Legacy-year claims can still be filed for fiscal years that began before March 26, 2025. If you are a Quebec claimant, confirm which regime your year falls under before you model the provincial half of your recovery.

Filing-year decision rule: Claims for tax years that began before December 15, 2024 must use pre-2025 rules (the $3M expenditure limit, no capital costs, no pre-claim approval). Claims for tax years that began after that date use the new $6M limit, restored capital eligibility, and may use pre-claim approval. If your tax year straddles the date (uncommon), the rule is set by the starting date, not the year end. Contact CRA's SR&ED unit if you are unsure which rules apply.

Step 1: Assess Eligibility

Apply CRA's mandatory 3-part test to determine if your work qualifies.

Quick answer · 30 seconds

Your work qualifies for SR&ED if it meets all three tests: technological uncertainty (the outcome was not predictable using standard practice), systematic investigation (you followed a documented scientific or engineering method), and technological advancement (the work extended technical knowledge). If any one fails, the claim fails.

The CRA 3-Part Eligibility Test

Before beginning your claim, confirm that your work meets CRA's three mandatory eligibility criteria. All three must be satisfied for the work to qualify as SR&ED. CRA reviewers assess each criterion independently, and failure on any single test disqualifies the project.

1. Technological Uncertainty

Could the desired outcome be achieved using standard practice or existing knowledge? If not, you have technological uncertainty. This is the most critical test. Example: You need software to process 10 million records in under 2 seconds, but known algorithms cannot achieve this at your data scale.

2. Systematic Investigation

Did you follow a methodical approach involving hypothesis, experimentation, and analysis? CRA wants to see that you formulated a theory, designed experiments, recorded results, and drew conclusions from measured data.

3. Technological Advancement

Did the work aim to generate new knowledge or capabilities beyond the current state of the art? The advancement does not need to be revolutionary. A novel caching strategy achieving sub-second response times for a specific query class that previously took 15+ seconds qualifies.

Important: Both successful and failed projects can qualify. SR&ED eligibility is based on the nature of the work attempted, not whether it succeeded. If you set out to resolve a genuine technological uncertainty through systematic investigation, the work qualifies regardless of the outcome.

What qualifies by industry:

Software: Novel algorithms, AI/ML models with uncertain outcomes, real-time processing at unprecedented scale, new compiler features, security architectures for novel threats
Manufacturing: New production processes, material challenges, process optimization requiring experimentation, tooling innovations
Life sciences: Drug formulations, diagnostic tool development, bio-process scaling, novel treatment methods
Engineering: Prototype development with uncertain performance, new material applications, structural innovations
Clean technology: Energy efficiency innovations, emissions reduction methods, novel recycling processes

What does NOT qualify: Routine engineering, cosmetic changes, market research, quality control for production, standard debugging, style or design changes without technical challenge, and data collection without analysis.

Expert Deep-Dive How CRA reviewers actually score each criterion — with pass/fail examples and documentation templates

Criterion 1: Technological Uncertainty — How CRA Scores It

CRA technical reviewers do not score technological uncertainty by how hard the problem felt. They score it by whether the outcome could have been predicted in advance using published techniques, industry standards, or the claimant's existing knowledge base. The test is binary per project: either the outcome was genuinely unknown at project start, or it wasn't.

Pass example (Saskatchewan agritech): A grain-analytics startup tries to compress a crop-identification neural network below 128MB for edge deployment on farm machinery. No published technique has achieved this class of network below 256MB. After six months of systematic experiments with novel quantization approaches, the team confirms the target is reachable at 118MB. Qualifies — the outcome was genuinely unknown at project start.

Fail example (same company, different project): The team implements a documented memory-compression technique from a 2021 ICML paper and confirms it works on their data. Six months of implementation effort. Does not qualify — the solution approach was known in advance; the work was implementation, not investigation.

Template for your project log:

Project: [Name]
Stated technological uncertainty: [What was unknown at start?]
Published techniques considered and rejected: [List with reasons]
Starting knowledge assumption: [What we thought was possible]
Actual outcome: [What we learned]

Criterion 2: Systematic Investigation — Documentation Requirements

This criterion has the lowest implicit bar but the highest documentation burden. CRA does not require PhD-grade methodology; it requires that the work followed a pattern of hypothesis → experiment → observed result → interpretation, documented in real time. The biggest cause of failed SR&ED claims is reconstruction from memory at tax-filing time. If you cannot produce contemporaneous records — project logs, lab notebooks, git commits, JIRA/Linear tickets, Slack messages, engineering notebooks — CRA will reduce or deny the claim regardless of whether the work genuinely qualified.

Acceptable forms of contemporaneous documentation:

Engineering logs, project-management tool entries (Linear, JIRA, Asana, Monday)
Git commit histories with descriptive messages tied to experiments
Design docs, RFCs, ADRs (architecture decision records) with dates
Lab notebooks or Excel logs with timestamps
Email threads with experiment results (saved with headers)
Slack/Teams messages in project-specific channels
Meeting notes recording hypothesis and experimental design

Criterion 3: Technological Advancement — The "Knowledge Generated" Test

Technological advancement has the most lenient interpretation of the three criteria when applied correctly. The advancement does not need to be patentable, commercially valuable, or revolutionary. It needs to produce knowledge that was not previously available to the claimant or to the public — including knowledge about what does not work. A failed experiment that conclusively rules out an approach can qualify if the team documents the negative result with sufficient detail.

What CRA wants to see in your T661 narrative: specify the state of technical knowledge at project start, describe the advancement attempted, and report the outcome (successful or not) with technical detail. Use precise technical language. Cite specific technologies, versions, benchmarks, or standards. Avoid marketing language ("cutting-edge", "revolutionary", "world-class") — CRA reviewers flag these as evidence of claim-padding.

Industry-specific eligibility patterns

Software / AI / SaaS: Novel algorithms with performance claims, ML model architectures attempting scale or accuracy frontiers, security protocols for novel attack classes, compiler or interpreter optimization for new hardware, real-time systems with unprecedented throughput targets.

Manufacturing / Clean-tech: Process optimization requiring experimental iteration (not standard tuning), material formulation with unknown performance, emissions-reduction engineering, novel tooling approaches, automation workflows with uncertain integration outcomes.

Life sciences / Biotech: Drug formulation experiments, diagnostic tool development with uncertain sensitivity/specificity, bio-process scaling, treatment protocols, novel delivery mechanisms.

Engineering: Prototype development with performance uncertainty, new material applications, structural innovations beyond code requirements, thermal/fluid/electromagnetic problems requiring experimentation.

Here's what most first-time claimants miss The single most common failure mode is not misunderstanding the three criteria — it's failing to document systematically as the work happens. Every successful SR&ED claim has contemporaneous records: a git commit from April showing the algorithm change, a Linear ticket from May describing the hypothesis, a test log from June recording the result. When you reconstruct these at tax time from memory or email searches, you lose reviewer confidence fast. Start the project log on day one of any experimental work.

Step 2: Document Your Projects

Contemporaneous records are the single most important factor in claim success.

Maintain Contemporaneous Documentation

This is where most SR&ED claims succeed or fail. Contemporaneous documentation means records created at the time the work was performed, not reconstructed after the fact for the claim. CRA reviewers heavily weight this evidence, and the absence of real-time records is the single most common reason claims are reduced or denied.

What CRA expects to see:

Project descriptions: What problem you were trying to solve and why existing solutions were inadequate
Hypotheses: What you believed might work and why, documented before beginning experiments
Experiment logs: Step-by-step records of what you tried, parameters used, and outcomes observed
Test results: Quantitative data from benchmarks, lab tests, prototype evaluations, or field trials
Meeting minutes: Technical discussions about approaches, challenges, and decisions
Design iterations: Versions of designs, schematics, or code showing the evolution of your approach
Records of failure: Documentation of approaches that did not work and analysis of why they failed
Conclusions: What you learned, whether the uncertainty was resolved, and what advancement was achieved

Best practices:

Use project management tools (Jira, Asana, Notion) and tag SR&ED-related tasks
Maintain a shared engineering or lab notebook updated weekly at minimum
Keep all code in version control with descriptive commit messages referencing SR&ED projects
Save email threads discussing technical challenges and proposed solutions
Take photos or videos of physical prototypes at each iteration stage
Schedule monthly "SR&ED documentation check-ins" to ensure records are current

Step 3: Track Eligible Expenditures

Five categories of costs you can claim — including capital expenditures (restored by Budget 2025).

Categorize and Document Eligible Costs

Accurately tracking eligible costs is essential for maximizing your SR&ED claim. Employee salaries and wages typically represent 60-80% of most claims, but overlooking materials, contractor costs, and the newly restored capital expenditures leaves money on the table.

Salaries & Wages

Wages of employees directly performing, supervising, or supporting SR&ED work. Only the portion of time on eligible activities is claimable. Use timesheets to allocate between SR&ED and non-SR&ED duties. Include salary, bonuses, and taxable benefits.

Materials Consumed

Raw materials, supplies, and components consumed or permanently altered during R&D. Prototyping materials, chemicals used in experiments, and test specimens qualify. Materials remaining usable after testing are generally not eligible.

Contractor Fees (80% Rule)

Payments to arm's-length subcontractors for SR&ED work are eligible at 80% of the invoiced amount. For non-arm's-length parties, the amount is limited to actual costs. Contracts should specify SR&ED-eligible activities.

Overhead (Proxy vs Traditional)

Choose one method for all projects per year. Proxy method: claim 55% of eligible salaries as overhead (simpler). Traditional method: claim actual overhead costs (rent, utilities, equipment depreciation). Most SMEs use proxy.

Capital Expenditures Budget 2025

Budget 2025 restored capital expenditure eligibility for SR&ED after removal in 2014. Equipment and machinery purchased for R&D purposes can once again be included in your claim. This is a significant change for hardware-intensive industries.

Key tracking tip: Set up dedicated cost centres or project codes in your accounting system at the start of the fiscal year. Retroactively extracting SR&ED costs from general ledger accounts at filing time is error-prone and time-consuming. Proactive tracking produces more accurate claims and better withstands CRA review.

Step 4: Complete Form T661

Section-by-section walkthrough of the core SR&ED filing document.

Quick answer · 30 seconds

Form T661 has a financial half and a technical half. The financial half is arithmetic your accountant can do. The technical half — Part 6, three questions per project — is where claims are actually won and lost, and it is the one part nobody but your own engineers can source. Part 9 asks who prepared the claim and on what fee basis; omitting it costs $1,000.

Prepare Form T661

Form T661 (Scientific Research and Experimental Development Expenditures Claim) is the core document of your SR&ED filing. It contains both financial and technical information. Understanding each section is critical for a successful submission.

Part 2: Project Information

Basic project details: title, start and end dates, field of science or technology, and whether the project is new or continuing. Each distinct SR&ED project gets its own Part 2. Group related work into logical projects rather than dozens of micro-projects.

Part 3: Expenditure Details

Report all eligible expenditures by category: salaries, materials, subcontractor costs, capital expenditures, and overhead. Amounts must be allocated to specific projects. Ensure numbers reconcile with your accounting records.

Part 6: Project Description (Technical Narrative) — This is the most important section and the one most often done poorly. For each project, answer three questions in clear, technical language:

What technological advancement were you trying to achieve? Describe the specific capability or knowledge you aimed to develop beyond what was currently available.
What technological obstacles or uncertainties did you face? Explain why the desired outcome could not be achieved through standard practice. Identify the specific unknowns.
What work did you perform to address the uncertainty? Describe the systematic investigation: hypotheses tested, experiments conducted, methodologies used, and conclusions drawn.

Common Part 6 mistakes:

Using marketing language instead of technical descriptions
Describing what the product does instead of the technical challenges overcome
Failing to articulate the specific technological uncertainty
Not demonstrating systematic investigation (just saying "we tried different approaches")
Mixing business objectives with technical objectives

Also choose your reporting method for overhead. The proxy method (55% of eligible salary costs) is simpler and preferred by most small and medium businesses. The traditional method (actual overhead costs) may yield higher claims for companies with significant R&D facility costs. Run the numbers for both before committing, as you cannot change after filing.

Part 9: claim preparer information — the section most first-time filers skip. If anyone other than your own staff prepared or advised on the claim, you must name them and state the fee arrangement, including whether it is contingency-based. An incomplete or missing Part 9 triggers a $1,000 penalty and flags the claim. Whichever route you choose, know who is signing this section before the return goes in. A line-by-line walkthrough of the whole form: the T661 form guide.

Verdict · the one section worth paying for

If you are going to buy help anywhere in this process, buy it for Part 6 — not for the arithmetic. The expenditure schedules are bookkeeping your accountant already knows how to do. The technical narrative is a genre of writing with its own conventions, and a weak one is the top reason claims are reduced. A consultant who interviews your engineers and turns their answers into CRA-shaped prose is doing something real; one who mainly re-types your general ledger is not.

Expert Deep-Dive Writing the Part 6 narrative — the structure CRA reviewers expect, with a before/after rewrite

The shape of a narrative that survives review

CRA's technical reviewers are reading for three things in a fixed order, and the fastest way to lose them is to open with what your product does. Establish the state of technical knowledge at the start of the project, then the specific unknown, then the work you did to resolve it, then what you learned — including if the answer was "this approach does not work." Negative results are eligible; unstated ones are not.

Before — the version that gets a reviewer's attention for the wrong reasons:

We developed a cutting-edge, industry-leading platform that allows
customers to search their documents faster than anything else on the
market. Our team worked extremely hard over many months and tried a
number of different approaches until we found one that worked well.

Every sentence here is about the product and the effort. There is no state of the art, no stated unknown, no method, and no measured outcome. "Cutting-edge" and "industry-leading" are read as claim-padding.

After — the same project, written for the reviewer:

State of knowledge at project start: published inverted-index approaches
achieve sub-second retrieval up to ~2M documents on commodity hardware;
above that, latency scales super-linearly in our corpus profile.

Technological uncertainty: whether sub-second retrieval was achievable
at 40M mixed-format documents without partitioning the index, which our
single-tenant deployment constraint ruled out.

Systematic investigation: four candidate approaches were specified and
benchmarked against a fixed 10,000-query workload (bloom-filter
pre-screening; learned sparse retrieval; hybrid dense/sparse rerank;
segment-level caching). Each was implemented to a common interface and
measured for p50/p95 latency and recall@20.

Outcome: three approaches failed to hold p95 under 1s at target scale
and were ruled out with measured data. Segment-level caching combined
with bloom pre-screening reached p95 = 780ms at recall@20 = 0.94.
Knowledge generated: the scaling limit is dominated by segment seek
count, not by index size, which was not predictable at project start.

Three rules that do most of the work

Name the state of the art you were starting from. Uncertainty only exists relative to what was already known. If you never say what was known, the reviewer cannot find your uncertainty.
Quantify the outcome, including the failures. "We tried several approaches" is not a systematic investigation. "Four approaches, benchmarked on a fixed workload, three ruled out with measured data" is.
Strike every marketing adjective. Reviewers treat "revolutionary", "world-class" and "cutting-edge" as noise at best and as padding signals at worst. Technical precision reads as confidence; superlatives read as substitution for it.

Group projects the way the work happened

Each distinct SR&ED project gets its own Part 2 and its own Part 6 narrative. Resist the temptation to split one line of investigation into a dozen micro-projects to make the claim look bigger — it multiplies the narrative surface a reviewer can find fault with, and CRA reads it as padding. Group related experiments pursuing the same uncertainty into one project.

Step 5: File with Your Tax Return

Deadlines, electronic filing, and amended returns.

Submit Your SR&ED Claim

Your SR&ED claim is submitted as part of your annual income tax return. It is not a separate filing; it accompanies your T2 corporate return (or T1 individual return). Use Schedule T2SCH31 (corporations) or Form T2038(IND) (individuals) to calculate the actual dollar amount of your investment tax credit.

Filing deadline: You have 18 months after your fiscal year-end to file. This deadline is absolute: CRA grants no extensions and there is no appeal for a late claim. Miss it and the entire credit for that year is gone.

Your deadline, and the date you should actually aim for

Fiscal year ends	File with the T2 (fastest)	Absolute deadline
Dec 31, 2025	Jun 30, 2026	Jun 30, 2027
Mar 31, 2026	Sep 30, 2026	Sep 30, 2027
Jun 30, 2026	Dec 31, 2026	Dec 31, 2027

The middle column is the T2 corporate return deadline — six months after year-end. Claims filed there are processed fastest; claims filed near the 18-month wall still qualify but queue longer.

ITC calculation:

CCPC Enhanced Rate: 35%

Available to Canadian-controlled private corporations on the first $6 million of qualified SR&ED expenditures per year (raised from $3M by Budget 2025). Fully refundable — CRA pays cash even if you owe no tax. The $6M threshold is shared among associated corporations.

Basic Rate: 15%

Applies to public corporations, foreign-controlled companies, and CCPC expenditures exceeding the $6 million threshold. Generally non-refundable (reduces taxes owed only), though certain small CCPCs may receive partial refundability.

Provincial credit stacking: Every province except Prince Edward Island — plus Yukon, the only territory with one — offers its own R&D credit that stacks on top of federal SR&ED, at rates from roughly 3.5% to 30%. Provincial credits are claimed on your provincial return, not on Form T661, and the provincial amount reduces your federal expenditure base, so the combined rate is not a simple sum of the two headline percentages. Model both halves before you commit to a filing approach — every jurisdiction's combined rate, in percent and in dollars, is set out in our SR&ED tax credit rates by province.

Electronic filing: Most corporations are required to file electronically. Ensure your tax preparation software supports Form T661 and Schedule T2SCH31. Coordinate with your accountant to ensure all forms are included. For a line-by-line walkthrough of the form itself, including the three narrative lines and the 18-month deadline math, see our step-by-step T661 form guide.

Amended returns: If you missed including SR&ED in your original return but are still within the 18-month window, file an amended return to add the claim.

Provincial R&D credits that stack on federal SR&ED — the four largest provinces

Province	Credit	Rate (all refundable)
Ontario	Innovation Tax Credit (OITC)	8%, max $240K/yr
Quebec	CRIC (replaced the legacy credit)	20–30%
Alberta	Innovation Employment Grant	8% base, 20% incremental
Saskatchewan	R&D Tax Credit	10% on first $2M/yr (CCPCs)

Rates and caps as carried in the GrantCompass catalog, last verified June–July 2026. Ontario also runs the non-refundable ORDTC at 3.5% alongside the OITC; Manitoba's credit is 15%, half refundable for in-house R&D.

Step 6: Prepare for CRA Review

Most claims are never reviewed. Here is what happens when yours is.

Handle CRA Review

Start from the base rate, because most coverage of SR&ED gets the emotional weight of this step wrong. In fiscal 2024–25 the CRA accepted 90% of SR&ED claims as filed, accepted a further 6% after modification, and denied 4%. Review is not the normal outcome, and being selected is not an accusation — but it is the moment your documentation either exists or does not, and it is why Step 2 matters more than any other step in this guide.

What actually happens to SR&ED claims (CRA, fiscal 2024–25)

Outcome	Share of claims	What it means for you
Accepted as filed	90%	Refund processed on the standard timeline; nothing further required
Accepted after modification	6%	CRA adjusts expenditures or projects; you still recover most of the claim
Denied	4%	Notice of Assessment explains why; 90 days to file a Notice of Objection

22,758 claims were filed in fiscal 2024–25 and $4.5 billion in credits was allowed. SR&ED is an entitlement, not a competition — you are not being ranked against other claimants.

Types of CRA reviews:

Financial review: CRA verifies expenditure amounts, payroll records, contractor invoices, and accounting allocations
Technical review: A CRA Research and Technology Advisor (RTA) assesses whether work meets the 3-part test. They may request documentation, conduct phone interviews, or schedule an on-site visit
Combined review: Both financial and technical reviews conducted simultaneously. More common for larger claims or first-time filers

Common review triggers:

First-time SR&ED claims (CRA often reviews new claimants)
Claims significantly larger than previous years
High proportion of contractor costs relative to salaries
Vague or poorly written technical descriptions in Part 6
Industries where CRA has found frequent ineligible claims
Claims prepared by certain SR&ED firms with high audit rates

How to prepare: Organize all contemporaneous documentation by project before the review begins. Have your technical leads available for interviews. Prepare a project summary that walks the reviewer through each project's uncertainty, investigation, and advancement. Respond to CRA requests within the stated window. A reviewed claim is generally processed within about 180 days rather than the usual 60.

The honest read on hiring here: if you are already under review, or you know your eligibility is contestable, this is the point where a specialist earns the fee. Review is a negotiation conducted in technical language, and someone who has defended a hundred claims will read the reviewer's questions faster than you will. That is a different judgement from "my claim is large, therefore I should hire someone" — size alone is not the trigger.

Step 7: Receive Your Refund

Timelines, payment methods, and what to do if amounts differ.

Receive Your Investment Tax Credit

After CRA processes your claim, you will receive your SR&ED investment tax credit. The timeline and form of payment depend on your business structure and claim complexity.

Timelines — updated, because the widely repeated numbers are out of date:

Not selected for review: about 60 days from filing. From April 2026, CRA targets 45 days for timely-filed refundable claims that are not reviewed
Selected for review: up to about 180 days
Pre-claim approval (optional, before you file): 90-day turnaround for technical eligibility confirmation

If you have read elsewhere that an SR&ED refund takes six to twelve months, that guidance predates the current service standards. Filing with the T2 return — six months after year-end — is processed fastest; claims filed close to the 18-month deadline still qualify but queue longer.

How refunds are delivered:

CCPCs (refundable credit): CRA issues a direct deposit (if enrolled) or mails a cheque. Set up direct deposit through CRA My Business Account to receive funds faster
Non-refundable credits: Applied against taxes owed. Unused credit can be carried back 3 years or forward 20 years

If the refund differs from your claim: CRA will issue a Notice of Assessment explaining adjustments. Common reasons include: expenditures reclassified as ineligible, projects deemed not to meet the 3-part test, or mathematical errors. You have the right to object within 90 days by filing a Notice of Objection. Consult an SR&ED specialist or tax lawyer before filing an objection.

8 Common SR&ED Claim Mistakes

The errors that most frequently reduce claims, trigger CRA adjustments, or cost you money.

Thinking your project is "too small" to claim

Even a single developer spending 30% of their time on a genuine technical challenge can generate a meaningful claim. A company with $200,000 in eligible salaries could recover $70,000+ at the CCPC enhanced rate. There is no minimum claim amount.

Missing the 18-month filing deadline

The deadline is absolute. CRA does not accept late SR&ED claims under any circumstances and there is no appeal for missed deadlines. Set a calendar reminder 12 months after your fiscal year-end to begin preparation.

Insufficient contemporaneous documentation

Reconstructing project records after the fact is the single biggest red flag for CRA reviewers. Start documenting R&D activities in real time from day one of your fiscal year, even if you are unsure the work will qualify.

Including ineligible routine work

Padding a claim with standard debugging or routine development increases review risk and can cause CRA to scrutinize your entire claim more aggressively. A smaller, well-documented claim is more valuable than a larger one reduced by 50% during review.

Not claiming overhead or materials

Many first-time filers only claim salaries. The proxy method adds 55% of eligible salaries as overhead with no extra documentation. On a $300,000 salary claim, that is $165,000 in additional eligible expenditures. Materials consumed during R&D are also commonly overlooked.

Poor technical descriptions in Form T661

The Part 6 narrative is where most claims are won or lost. Describe technical challenges, not product features. Write as if explaining to a fellow engineer unfamiliar with your specific project but who understands your field.

Not separating SR&ED time from commercial work

A developer spending 60% on eligible R&D and 40% on routine work can only claim 60% of their salary. Without timesheets to support this allocation, CRA may reduce the claimed percentage significantly.

Not claiming capital expenditures now that they are eligible

Budget 2025 restored capital expenditure eligibility after removal in 2014. If your R&D involves significant equipment purchases, failing to include these costs in your claim means leaving money on the table. Consult with your advisor on implementation details.

The decision table: hire, self-file, or split it

Sorted by the thing that should actually move your decision — how contestable the claim is, not how big it is.

IF your situation is... THEN the honest call is...

Under review now, or reviewed before

Hire. Defending a claim is adversarial technical work with real money on the table, and it is not a documentation exercise. This is the clearest case where a contingency fee is cheap.

Eligibility genuinely ambiguous

Hire — or use pre-claim approval first. Since April 2026 you can ask CRA directly for technical eligibility confirmation with a 90-day turnaround. If that comes back positive, the case for paying a percentage weakens considerably.

Nobody internally can write Part 6

Hire, for that section. Some firms sell narrative-only or review-only engagements at well below full contingency. Ask — the first quote is rarely the floor.

Routine R&D, records already exist, claim in the tens of thousands

Self-file with your accountant. 90% of claims are accepted as filed. A contingency percentage on a straightforward claim is expensive for what it is. Start from the self-filing walkthrough.

Second or third year claiming the same programme of work

Split it. Prepare the claim in-house and buy a review-only engagement. This is how most companies eventually get off full contingency without losing the expert read.

Multiple years unclaimed

Act on the calendar before you decide who files. Each year has its own 18-month window and the oldest one is expiring first. Establish which years are still open this week; choose your filing route after.

Hardware-heavy R&D

Get advice on the capital rules specifically. Equipment acquired after December 16, 2024 and used 90%+ for SR&ED is eligible again, and the 90% test is where hardware claims are most often adjusted.

Here's why "my claim is big, so I should hire" is the wrong rule A contingency fee scales with your refund; the filing does not scale with it. The T661 behind a $200,000 refund has the same parts, the same three narrative questions and the same evidence burden as the one behind a $50,000 refund — the numbers in Part 3 are simply larger. Paying four times more for it only makes sense if something about the larger claim is genuinely harder: contested eligibility, an unusual expenditure mix, a prior adjustment, a hardware-heavy capital position. If none of those apply, size alone is a reason to negotiate the rate, not a reason to hire.

Three ways to file, compared

What each route actually buys you — and what it does not.

Aspect	Self-file	Full consultant	Review-only / hybrid
What you pay	No fee	15–30% of the refund, contingency	Typically 5–15% of the refund, or a fixed fee
Who writes Part 6	Your engineers, in their own words	A specialist, after interviewing your engineers	You draft; the specialist rewrites
Who defends a review	You and your accountant	The firm — confirm this is included, some price it separately	Negotiable — agree it in writing up front
Risk transfer	None — the claim outcome is yours	Real: pure contingency means no fee if nothing is recovered	Partial
Part 9 disclosure	Nothing to disclose	Preparer and fee basis reported to CRA	Preparer and fee basis reported to CRA
Best for	Uncontested eligibility, records kept in real time	First claims with arguable eligibility; prior adjustments; contested science	Recurring claims where the work is stable year to year

← Scroll to see all columns →

One claim you will see made for the consultant route deserves a caveat: firms commonly say they identify materially more eligible work than self-filers do. That is plausible — scope really is the thing experience finds — but we have not seen it published in a form we can verify, so treat any specific percentage in a sales conversation as a marketing figure and ask what it is based on. What is verifiable is the arithmetic in the table above, and the fact that 90% of all claims are accepted as filed.

Worked Example: A Software Company's First SR&ED Claim

A realistic calculation showing how a CCPC in Ontario files its first claim.

TechCo Inc. — CCPC in Ontario, Fiscal Year Ending December 2025

The project: TechCo employs 8 developers, 3 of whom spend approximately 50% of their time developing a novel natural language processing engine that can parse ambiguous legal language — a problem where existing NLP frameworks produced unacceptable accuracy rates. The team tested 4 different transformer architectures, conducted systematic benchmarking, and documented each experiment in their engineering wiki.

Eligible expenditures:

3 developers at $120,000 average salary, 50% SR&ED allocation = $180,000 in eligible salaries

Proxy overhead (55% of salaries) = $99,000

Materials (cloud computing costs consumed during experiments) = $12,000

ARM's-length contractor (specialist NLP researcher, $40,000 invoiced, 80% eligible) = $32,000

Capital expenditures (GPU server purchased for model training, Budget 2025) = $25,000

Total eligible expenditures: $348,000
Federal ITC (35% enhanced rate, under $6M threshold): $121,800
Ontario Innovation Tax Credit (8%): $27,840
Total combined refund: $149,640 (43% effective rate)

The two routes, on the same claim. TechCo's fiscal year ends December 31, 2025, so its filing deadline is June 30, 2027. Self-filed, the claim above returns about $149,600 and TechCo keeps all of it. Filed by a consultant at 22% contingency, the consultant finds a further $45,000 of eligible expenditure TechCo had missed, lifting the combined credit to roughly $169,000 — and the fee takes about $37,000, leaving roughly $132,000.

Read that carefully, because it is the whole decision in one example: the consultant genuinely added value — $19,000 of expenditure TechCo would not have claimed — and TechCo still ended up with less money. That flips the moment the consultant finds materially more, or the moment eligibility is contested and the claim would otherwise have been reduced. Which is why the question is never "is a consultant good?" but "what specifically will this one find or defend that I cannot?"

"The SR&ED program is designed to encourage Canadian businesses of all sizes, and in all sectors, to conduct research and development in Canada. It is the single largest federal program to support business R&D."

— Canada Revenue Agency, SR&ED Program Overview

Where GrantCompass fits, and where it doesn't

Said plainly, because you should not find this out after paying.

We are not an SR&ED consultancy and we do not write your Form T661 technical narrative. If that is the job you need done, the sections above apply and you should price a consultant properly rather than look for a shortcut. Nobody at GrantCompass is reviewing your Part 6 the way a specialist would — which is the actual thing you buy when you pay a contingency fee.

What we do is the part either side of the claim. We check whether you qualify against the programme's real conditions, lay out the claim steps so you document as the work happens instead of reconstructing a year backwards, track the deadline that has no appeal — and, the part most SR&ED filers miss entirely, tell you which of 850+ other Canadian funding programmes you also qualify for. A company claiming SR&ED is frequently eligible for hiring, training, export and equipment funding it never applies for, and none of that is in your consultant's scope.

Verdict · what an SR&ED record gets you here

SR&ED is a filing, not an application — so it gets the steps treatment, not the drafting treatment. For grant programmes, the workspace drafts the application with you. For a tax credit claimed through your corporate return, what you get is the claim steps laid out, your eligibility checked against the real conditions, a running list of what you still need, and the deadline tracked. We would rather say that than let you assume otherwise.

Your consultant is quoting on one credit. See what else you qualify for.

Most companies claiming SR&ED also qualify for hiring, training, export or equipment funding they never apply for — money you would otherwise miss entirely. Both plans are shown together, and no account is needed to look.

Sources & Official References

CRA — SR&ED Program Overview
CRA — Form T661: SR&ED Expenditures Claim
CRA — Claiming SR&ED Tax Incentives
CRA — Eligibility of Work for SR&ED Tax Incentives
CRA — SR&ED Policies, Procedures, and Guidelines
Department of Finance Canada — Budget 2025: SR&ED Enhancements
CRA — SR&ED Filing Requirements Guide
CRA — Qualified SR&ED Expenditures and ITCs
Innovation, Science and Economic Development Canada — Innovation Canada
CRA — Provincial and Territorial R&D Tax Credits

Frequently Asked Questions

Answers to the most common questions about filing SR&ED claims in Canada.

What is the SR&ED filing deadline?

SR&ED claims must be filed within 18 months of your fiscal year-end. For example, if your fiscal year ends December 31, 2025, the deadline is June 30, 2027. This deadline is absolute — CRA does not grant extensions for SR&ED claims, and there is no appeal process for late filings. Missing the deadline means forfeiting the entire investment tax credit for that year.

Can I claim SR&ED retroactively?

Yes. You can file SR&ED claims retroactively for any fiscal year where the 18-month filing window has not yet closed. If you have never claimed before, you may be able to go back and file for the most recent fiscal year (or two) as long as each is within its 18-month window. You will need to amend your tax return and submit Form T661 along with the investment tax credit schedule. Many businesses discover SR&ED eligibility years into their operations and successfully file retroactive claims.

Does software development qualify for SR&ED?

Software development can qualify when it involves genuine technological uncertainty that cannot be resolved through standard coding practices. Building standard websites, mobile apps, or databases using known frameworks generally does not qualify. However, developing novel algorithms, creating AI/ML models where outcomes are uncertain, solving complex performance challenges beyond known solutions, or building new architectures to handle unprecedented scale can all qualify. The key test is whether the work required systematic experimentation to resolve a genuine technical challenge.

What happens during a CRA SR&ED review?

Most claims are not reviewed at all: in fiscal 2024–25 the CRA accepted 90% of SR&ED claims as filed, accepted a further 6% after modification, and denied 4%. When a claim is selected, the review has two parts — a financial review verifying expenditures, payroll and invoices, and a technical review in which a CRA Research and Technology Advisor assesses the work against the eligibility criteria. CRA may request documentation, interview technical staff by phone, or arrange a site visit. A reviewed claim is processed in roughly 180 days rather than the usual 60. Contemporaneous documentation is what decides the outcome.

Can startups with no revenue claim SR&ED?

Yes. Canadian-controlled private corporations (CCPCs) receive refundable SR&ED tax credits at the enhanced 35% rate. Refundable means CRA sends you a cash payment even if your company owes no tax and has no revenue. This makes SR&ED one of the most valuable non-dilutive funding mechanisms for pre-revenue technology startups in Canada. There is no minimum revenue, employee count, or company age requirement.

What changed in Budget 2025 for SR&ED?

Budget 2025 made two significant changes to SR&ED. First, the enhanced rate expenditure limit for CCPCs was raised from $3 million to $6 million, effectively doubling the amount eligible for the 35% refundable credit. Second, capital expenditures were restored as eligible SR&ED costs after being removed in 2014 — meaning equipment and machinery used for R&D can once again be included in your claim.

What is the difference between the 35% and 15% SR&ED rate?

The 35% enhanced rate is available exclusively to Canadian-controlled private corporations (CCPCs) on the first $6 million of qualified SR&ED expenditures per year (raised from $3M by Budget 2025). This credit is fully refundable — you receive cash regardless of tax liability. The 15% basic rate applies to all other claimants, including public corporations, foreign-controlled companies, and CCPC expenditures exceeding the $6 million threshold. The basic rate credit is generally non-refundable.

Can I claim both SR&ED and IRAP funding?

Yes, you can claim both SR&ED tax credits and IRAP grant funding on the same project, but you cannot double-claim the same expenditures. IRAP-funded costs are deducted from your SR&ED-eligible expenditure pool. For example, if IRAP reimburses $100,000 of a developer's salary, that amount cannot also be claimed under SR&ED. The remaining unfunded salary costs can still be claimed. Strategic planning of which costs to allocate to each program can maximize your total recovery.

How much does an SR&ED consultant cost?

Most SR&ED consultants work on contingency, commonly quoting 15–30% of the refund recovered, with 20–25% the usual middle. You pay nothing upfront and pay only on a successful claim, which is genuine risk transfer. The thing to understand about contingency is that it is priced on your refund, not on the work: a $60,000 refund at 20% costs $12,000, and a $200,000 refund at the same rate costs $40,000 for a filing that is not four times harder. Ask whether the percentage applies to the federal credit only or to federal plus provincial, and whether audit defence is included. Full breakdown: what an SR&ED consultant actually costs.

Are capital expenditures eligible for SR&ED again?

Yes. Budget 2025 restored capital expenditure eligibility for SR&ED after they were removed in 2014. This means equipment and machinery purchased for R&D purposes can once again be included in your SR&ED claim. This is a significant change for hardware-intensive industries such as manufacturing, life sciences, and clean technology, where capital equipment represents a major portion of R&D spending. Consult with your accountant or SR&ED advisor on the specific implementation details and timing.

How long does CRA take to pay an SR&ED refund?

For a claim that is not selected for review, CRA processes SR&ED refunds in about 60 days from filing, and from April 2026 targets 45 days for timely-filed refundable claims that are not reviewed. A claim selected for review takes up to about 180 days. Filing with the T2 corporate return — six months after fiscal year-end — is processed fastest; claims filed close to the 18-month deadline still qualify but queue longer. Guidance saying an SR&ED refund takes six to twelve months predates the current service standards.

Do I need an SR&ED consultant?

It depends on how contestable your claim is, not on how big it is. Hire when eligibility is genuinely arguable, when you have been reviewed before or expect to be, or when nobody internally can write the Part 6 technical narrative. Self-file when your R&D is a normal part of how you build, your documentation already exists in real time, and the claim is straightforward — CRA accepts 90% of claims as filed, and a contingency fee scales with your refund rather than with the difficulty of the filing. Note that Part 9 of Form T661 requires you to disclose your claim preparer and the fee arrangement to CRA; omitting it triggers a $1,000 penalty. See filing SR&ED without a consultant.

What is pre-claim approval, and should I use it?

Pre-claim approval is a voluntary CRA process, live since April 2026, that gives you technical eligibility confirmation before you file — with a 90-day turnaround. It is most useful for first-time claimants and for novel or unusually large projects, because it answers the one question that otherwise stays open until a review two years later. It also changes the economics of hiring: if CRA has already confirmed eligibility, much of what a consultant is paid to de-risk has already been de-risked.

Stay Updated on R&D Funding

Get notified when SR&ED rules change, filing deadlines approach, or new R&D programs launch.