CRA requires your work to meet both WHY and HOW requirements. Your work must advance knowledge AND use systematic investigation.
The Two Requirements
Your work must meet both requirements to qualify for SR&ED:
1. The "WHY" Requirement
Your work must be conducted to advance scientific or technological knowledge.
Key question: Is there something you don't know how to achieve?
- You face a scientific or technological uncertainty
- Existing knowledge (yours + publicly available) isn't enough
- You need to generate new knowledge to solve the problem
- Success or failure doesn't matter - the attempt counts
2. The "HOW" Requirement
Your work must be a systematic investigation using experiment or analysis.
Key elements:
- Hypothesis: Form an idea about what might work
- Testing: Experiment or analyze to test your idea
- Conclusions: Draw logical conclusions from results
- Documentation: Keep records of your process
Three Categories of Eligible Work
Experimental Development (Most Common)
Work undertaken to achieve technological advancement for the purpose of creating new, or improving existing, materials, devices, products, or processes.
Examples:
- Creating a faster algorithm
- Developing a new manufacturing process
- Integrating incompatible technologies
- Solving performance issues with unknown causes
Basic Research
Advancing scientific knowledge without a specific application in mind.
Example: Studying a newly discovered virus to understand its characteristics.
Applied Research
Advancing scientific knowledge with a specific practical application.
Example: Developing a vaccine against a new virus using known characteristics.
You May Already Be Doing SR&ED
Many companies conduct SR&ED without realizing it:
Software Development
- Custom algorithms for unique business problems
- Performance optimization beyond standard practices
- Integration challenges with legacy systems
- Security solutions for novel requirements
Manufacturing
- Process improvements requiring experimentation
- Quality control innovations
- Material testing for new applications
- Automation of complex processes
Engineering
- Design optimization through iterative testing
- System integration with unknown interactions
- Complex troubleshooting requiring investigation
- Prototype development for new products
If you're solving technical problems through experimentation, documenting your process, and learning from failures, you may already be conducting SR&ED.
What Doesn't Qualify
Excluded work cannot be claimed:
- Market research or sales promotion
- Quality control or routine testing of materials, devices, products, or processes
- Research in the social sciences or humanities
- Prospecting, exploring, or drilling for, or producing, minerals, petroleum, or natural gas
- Commercial production of a new or improved material, device, or product, or the commercial use of a new or improved process
- Style changes
- Routine data collection
Support Work
The CRA recognizes eight specific types of support work that are eligible when they are directly in support of and commensurate with the needs of basic research, applied research, or experimental development:
- Engineering
- Design
- Operations research
- Mathematical analysis
- Computer programming
- Data collection
- Testing
- Psychological research
Support work on its own does not constitute SR&ED. It only qualifies when performed specifically to support eligible SR&ED activities, not for routine business operations.
Projects
To qualify for SR&ED, your projects must meet specific criteria:
What Makes a Project Eligible
- Technical Uncertainty: The project must address a genuine technical challenge that couldn't be solved using standard knowledge
- Advancement: Work must aim to advance technology or scientific knowledge
- Systematic Investigation: You must use a methodical approach with hypothesis, testing, and analysis
- Documentation: Keep records of your objectives, progress, and results
Project Scope
A single SR&ED project can include:
- Multiple related experiments or prototypes
- Iterative development cycles
- Both successful and unsuccessful attempts
- Work by multiple team members
You don't need to complete a project to claim SR&ED. Abandoned projects with documented learning can still qualify.
Employees
Not all work performed by employees qualifies for SR&ED. Here's what you need to know:
Eligible Employee Activities
Employees can be claimed for SR&ED when they:
- Directly perform research, testing, or experimentation
- Directly supervise SR&ED activities (technical supervision)
- Directly support SR&ED work (engineering, programming, data collection)
Who Can Be Claimed
- Technical staff: Engineers, developers, scientists, technicians
- Project managers: Only for time spent on technical oversight of SR&ED
- Support staff: Lab technicians, QA testers (for SR&ED-specific testing)
Who Cannot Be Claimed
- Administrative staff (HR, accounting, general management)
- Sales and marketing personnel
- Employees doing routine production work
- General supervision not related to SR&ED
Time Tracking Requirements
You must be able to document:
- Who performed SR&ED work
- When the work was performed
- How much time was spent on SR&ED activities
- What specific tasks were performed
Keep timesheets, project logs, or other records that show employee time allocation. CRA may request this documentation during a review.