Canada is one of the most generous countries in funding research, innovation, and experimentation, providing over $4.5 billion annually to over 30,000 companies under the Scientific Research & Experimental Development (SR&ED) tax credit program.  Introduced in the 1980s, the SR&ED program is intended to encourage businesses of all sizes, particularly small to medium and start-up firms, to conduct applied research and development (R&D) that will lead to new, improved, or technologically advanced products, processes, principles, methodologies, or materials.

Companies can recover up to 68% of their expenditures, including wages, materials, machinery, equipment, travel and training expenses, property taxes, utility expenses, overhead, provided they meet the following three criteria:

Technological Advancement: The search carried out in the experimental development activity must generate information that advances your understanding of the underlying technologies. In a business context, this means that when a new or improved material, device, product or process is created, it must embody a technological advancement in order to be eligible. In other words the work must attempt to increase the technology base or level from where it was at the beginning of the project.

Technological Uncertainty: Technological obstacles/uncertainties are the technological problems or unknowns that cannot be overcome by applying the techniques, procedures and data that are generally accessible to competent professionals in the field.

Technical Content: A systematic investigation entails going from identification and articulation of the scientific or technological obstacles/uncertainties, to hypothesis formulation, through testing by experimentation or analysis, to the statement of logical conclusions. In a business context, this requires that the objectives of the scientific research or experimental development work must be clearly stated at an early stage in the evolution of the project, and the method of addressing the scientific or technological obstacle/uncertainty by experimentation or analysis must be clearly set out.

Questions to ask yourself when determining SR&ED eligibility:

-Are you involved in engineering, design, data collection, testing or other developmental work?
-Have you designed or developed new software?
-Have you changed a process to reduce costs or to improve your manufacturing?
-Have you created a new product, made improvements or added new features to an existing product, or built a prototype?
-Have you incurred costs related to a process, project or prototype that is incomplete because of unresolved technical problems?