The SR&ED program is the largest single source of federal government support for research and development. The goal of the SR&ED program is to encourage Canadian businesses of all sizes and all sectors to conduct research and development that will lead to new or improved technologically advanced products or processes, and subsequently lead to more jobs and a better Canadian economy. Currently, approximately $4 billion is provided to over 20,000 claimants per year.

The SR&ED program is under-utilized in general for various reasons - tedious administratively to work through, people are too busy with their daily operations, or they don't have the internal expertise (accounting/technology) to successfully claim.

The crucial step with SR&ED is preparing an appropriately written scientific narrative - this isn't easy and requires careful use of technical language concentrating on Technological Obstacles/Uncertainty, Technological Advancement and Systematic Investigation/Experimentation - if you can effectively present this, and you have supporting documentation, you will be successful. Note that it doesn't have to be inventing the light bulb, but could be an enhancement of an existing technology within cost constraints, or a new process.

Please note that there is a deadline for SR&ED - you must apply within 18 months after your year-end.

Simple SR&ED calculation (Assumes a Canadian Controlled Private Corporation within taxable income and capital thresholds)

$100,000 in eligible salaries
add 65% proxy overhead = $165,000 in eligible salaries
$165,000 x 10% = $16,500 Provincial tax credit (Ontario example - some other Provinces offer differeing rates)
($165,000 - $16,500) x 35% = $51,975 Federal tax credit*
Total Tax credit = $68,475 TO BE USED TO REDUCE TAXES OR RECEIVE A REFUND CHEQUE FROM THE GOVERNMENT!

*The Federal government subtracts other assistance from the formula

For more information on the Scientific Research and Experimental Development (SR&ED) program, visit Canada Revenue Agency's web site