The Canadian Scientific Research and Experimental
Development Tax Incentive
Program(SR&ED) encourages research
and development by offering support to businesses that conduct
scientific research or experimental development in Canada. The
SR&ED tax incentive program allows businesses to deduct
SR&ED expenditures from their income and also provides
SR&ED Investment Tax Credit (ITC) to reduce Part 1 tax.
Subsection 248(1) of the Income Tax Act (the
"Act") provides for the definition of SR&ED.
In Northwest Hydraulic Consultants Ltd. v. Canada1, the
Tax Court of Canada interpreted the provisions of the Act and found
a five step approach to determine if an activity is SR&ED:
Was there a technical risk or
uncertainty – an uncertainty that could not be removed by
techniques, procedures and data that are generally accessible to
competent professionals in the field?
Was a hypothesis formulated for the
purpose of reducing or eliminating that technological
Were the procedures used consistent
with established and objective principles of scientific method,
including trained and systematic observation, measurement and
experiment, and the formulation, testing and modification of
Did the process result in a
scientific or a technological advancement?
Was there a detailed record of the
hypotheses, tests and results kept as the work progresses?
The Canada Revenue Agency has since adopted the test provided
for by the Tax Court2.
There are further conditions for SR&ED credits even if the
above test is satisfied. Other conditions include, but are not
limited to: the expenditures must all or substantially all be for
SR&ED, the activity must be performed in Canada, and the
activity must not be for commercial production.
In order to make a SR&ED claim, you should file Form T661,
either Form T2SCH31 (for corporations) or Form T2038(IND) (for
individuals) as well as supporting documentation.
If there are concerns regarding the SR&ED being claimed that
is not resolved with discussions with the SR&ED staff at the
CRA, then you should ask for an Administrative Second Review so
that the Assistant Director of the SR&ED program or a person
assigned by the Assistant Director will reconsider your case.
If the decision is maintained after the Administrative Second
Review, then a Notice of Assessment will be issued. If you disagree
with the decision, then a Notice of Objection must be filed within
Our firm can assist persons going through the Administrative
Second Review as well as the Notice of Objection stages.
The CRA provides new housing rebates for individuals who have purchased or built a new house or have substantially renovated a house or made a major addition to a house who plan on living in it personally or letting a relative live there.
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).