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)
Developing new or improved 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
- Social sciences or humanities research
- Mineral/oil/gas exploration
- Commercial production of new products
- Style changes
- Routine data collection
Support Work
These activities can be part of SR&ED if they directly support your research:
- Engineering
- Design
- Operations research
- Mathematical analysis
- Computer programming
- Data collection
- Testing
- Psychological research
Key: The work must be done specifically to support your SR&ED project, not for routine business operations.