Is My Project and Day-to-Day Work Eligiblefor SR&ED? Here’s How to Tell

When business owners and technical leads try to evaluate their work for Canada’s Scientific
Research and Experimental Development (SR&ED) program, they usually make the mistake of
looking at the final product. They think, “We built a custom mobile app,” or “We manufactured a
lighter trailer hitch—is that eligible?”

The Canada Revenue Agency (CRA) does not look at your commercial product to determine
eligibility. Instead, they look at the underlying technical journey and the exact nature of your
day-to-day work.

To determine if your current project and daily tasks qualify for massive tax credits, you need to
break your operations down into two categories: The “Why and How” of the Project, and The
Daily Tasks of the Team.

Part 1: The Project Test (The “Why” and “How”)

The CRA relies on a strict two-part framework to evaluate whether a project qualifies as
SR&ED:

1. The “Why”: Is there a Technological Uncertainty?

A project is only eligible if your team ran into a technical brick wall. You must have a clear
objective that could not be achieved using standard practices, readily available libraries, or open-
source knowledge.

Eligible: You are trying to synchronize data across thousands of edge devices under
highly unstable network conditions, and standard protocols keep dropping packets.

Ineligible: You are integrating a standard Stripe payment gateway into an app. It might
be difficult or time-consuming, but the knowledge on how to do it is publicly available.

2. The “How”: Is it a Systematic Investigation?

You cannot stumble into an SR&ED credit by accident or through random trial-and-error. The
daily workflow of the project must follow a structured approach:

• Define the technical problem.
• Formulate a hypothesis (an educated guess or alternative approach).
• Test the hypothesis through experimentation, data analysis, or prototyping.
• Draw logical conclusions based on the results.

Part 2: Day-to-Day Work (What Tasks Actually Qualify?)

If your project meets the criteria above, you can look at the daily timesheets of your team.
SR&ED recognizes Core R&D Work as well as Direct Support Work.

Here is a breakdown of what daily tasks are eligible versus what must be excluded.

Software Development & IT

ELIGIBLE:

• Writing custom code to test a new system architecture or performance hypothesis.
• Conducting algorithmic optimization to reduce CPU or memory usage beyond standard thresholds.
• Creating custom APIs or middleware to force incompatible legacy systems to share data in real time.
• Performing performance testing, benchmarking, and analyzing the data to find bugs in your custom architecture.

INELIGIBLE:

• Writing standard HTML/CSS or designing user interfaces (UI/UX).
• Fixing routine, non-conceptual software bugs.
• Deploying standard security patches or performing routine database migration.

Manufacturing & Engineering

ELIGIBLE:

• Designing, building, and assembling physical prototypes or experimental molds.
• Running trial batches on a production line to see if a new material mixture holds structural integrity under high heat.\
• Modifying machinery or equipment to achieve capacities, tolerances, or speeds it wasn’t originally built to handle.
• Scrapping materials during an experimental failure (the cost of the ruined raw materials is eligible!).

INELIGIBLE:

• Standard quality control (QC) and routine testing of everyday products.
• Routine tool changes or regular maintenance on machinery.
• Cosmetic or stylistic changes to a product that don’t change its structural
  functionality.

Science, Biotech & Agri-Food

ELIGIBLE:

• Developing a new recipe or formulation to extend food shelf-life without chemical preservatives.
• Testing custom soil, lighting, or nutrient configurations in a greenhouse to isolate structural growth variables.
• Clinical trials, strain isolation, or conducting laboratory analysis.

INELIGIBLE:

• Routine commercial production of food, cannabis, or medical goods.
• Packaging design or marketing research.