SR&ED Eligible

Term Definition
The Scientific Research and Experimental Development (SR&ED) program is a federal tax incentive program to encourage Canadian businesses of all sizes and in all sectors to conduct research and development (R&D) in Canada that will lead to new, improved, or technologically advanced products or processes. Often a project will contain tasks and activities that are research and development eligible. SR&ED eligible refers to tasks and activities that would qualify for the SR&ED program.

The SR&ED program is the largest single source of federal government support for industrial research and development. Claimants can apply for SR&ED investment tax credits for expenditures such as wages, materials, machinery, equipment, some overhead, and SR&ED contracts.

The SR&ED Program is a federal initiative; however, most provinces also have their own SR&ED programs. The basic guidelines of the federal SR&ED program also apply to provincial programs.

Generally, a Canadian-controlled private corporation (CCPC) can earn an investment tax credit (ITC) of 35% up to the first $2 million of qualified expenditures, and 20% on any excess amount. (For CCPCs, part of the ITC may be fully refundable in cash.) Other Canadian corporations, proprietorships, partnerships, and trusts can earn an ITC of 20% of qualified expenditures.

Each year, the CRA receives claims from over 11,000 companies participating in the program. Of these, about 75% are small companies whose claims for R&D expenditures generally range from $20,000 to $2,000,000.

The Canadian SR&ED program aims to advance computer science or information technology. In addition, computer programming that is commensurate with the needs, and directly in support, of an SR&ED project in any field of science or technology is a qualifying SR&ED support activity.

Organizations must be able to identify work that is SR&ED eligible from work that is not. Time tracking software facilitates the task of tracking eligible tasks within a project. For example, a software program would code SR&ED work. This attribute would allow an organization to identify projects, tasks, time entries, expenses and/or charges in order to filter the information when generating reports. This is valuable data for organizations that perform research and development when creating their government tax credits for R&D funding. The data would also provide an audit trail ensuring the information is always acceptable for auditing purposes.

Area of Application
Project Accounting
Timesheet

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