Am I doing SREDable work? Many companies are doing work that would qualify for SR&ED and are unaware of it. We often get calls from clients asking this very question: Am I doing SREDable work?

In the realm of Scientific Research and Experimental Development (SR&ED), there are three different types of research that qualify. Each type of research serves distinct purposes, each contributing uniquely to scientific and technological advancement. If you are currently working on a project that covers one of these then you may be doing SREDable work!

Here’s a breakdown of the key types of research under SR&ED: 

  1. Basic Research is driven by curiosity and explores fundamental scientific principles without specific practical applications. Scientists aim to expand our understanding of the natural world. This includes uncovering underlying principles governing various phenomena, forming the bedrock of scientific discovery and laying the foundation for future innovations.
  2. Applied Research uses basic research findings to solve real-world problems and develop new technologies. It has practical goals, aiming to improve processes, products, or systems, and provides direct tangible benefits to industries, society, or the environment.
  3. Experimental Development focuses on the practical application of scientific and technological knowledge. It involves systematic efforts to create new products, and processes, or to improve the existing ones. This research aims for technological advancements, involving prototyping, testing, and refining to bring innovations to market readiness.

Why It Matters  

The above are the identified types of research and development that qualify for the SR&ED tax incentives program. This program allows you to: 

  • Claim a deduction against income 
  • Earn an investment tax credit (sometimes referred to as an ITC) 

Understanding what you are doing and how it qualifies for SR&ED will help you determine how best you can prepare for a claim. This will then increase the likelihood for a successful filing and get more money in your pocket. The goal of this is then to contribute to the knowledge base and innovation created within Canada from the government’s perspective. From your side, you will be able to use this additional money received early in the development to kick back to taking the successful product to market. Or if the project was unsuccessful, to help you absorb the expenses around this and get your business to that next project that may be. This includes proper and appropriate project documentation to support your claim during an audit.

Want to learn more, you can search our other SRED blogs, visit CRA’s SRED website: https://www.canada.ca/en/revenue-agency/services/scientific-research-experimental-development-tax-incentive-program/what-are-sred-tax-incentives.html or contact us for more information. Virtual Heights Accounting both files SR&ED Claims for outside clients (and will work with your current accountant to file) and also files them for our internal clients as well. We are not SR&ED Consultants. We are a Canadian CPA firm offering SR&ED services. If you’re interested in our SR&ED services you can book an initial eligibility technical/financial review. Book here for an SR&ED eligibility call.