Canada’s 2025 Federal Budget has introduced a game-changing set of measures for manufacturers focused on innovation. The expanded Scientific Research and Experimental Development (SR&ED) program marks the most significant upgrade to Canada’s flagship innovation incentive in years—and manufacturing companies are poised to benefit the most.

The headline numbers speak for themselves: The expenditure limit has doubled from $3 million to $6 million (well above the $4.5 million many experts expected), capital expenditures are eligible again after years of exclusion, and public companies now have access to refundable credits that were previously reserved for CCPCs. But beyond these numbers lies a strategic opportunity for Canadian manufacturers to dramatically accelerate their innovation—without giving up equity or overextending their teams.

Why Manufacturers Stand to Gain the Most from SR&ED

Manufacturing has always been a natural fit for SR&ED, but these new enhancements are especially well aligned with how today’s manufacturers innovate. Unlike pure software development, which is mostly salary-based, manufacturing R&D requires significant capital investment—new equipment, specialized tooling, prototype machinery, and production line upgrades. By making capital expenditures eligible again, SR&ED fundamentally changes the value proposition for manufacturers.

Take, for example, a mid-sized manufacturer developing a new automated assembly process. Under the old rules, only the engineers’ salaries would qualify. Now, the specialized robotics equipment, custom sensors, and upgraded production machinery are all eligible expenses. For capital-intensive innovation, this dramatically increases the credits you can claim.

Doubling the expenditure limit amplifies this advantage. Canadian manufacturers tackling major innovation projects—whether it’s advanced materials, Industry 4.0 technologies, or greener production methods—can now recover much more of their eligible costs at the enhanced 35% refundable rate. For a CCPC manufacturer maximizing the new $6 million cap, that’s up to $2.1 million in refundable tax credits each year.

Capital Expenditures: A Game-Changer for SR&ED

The return of capital expenditures is a major breakthrough. Since 2014, SR&ED excluded capital costs—a policy that hit manufacturers hardest, since their innovation depends on equipment investment. This created a situation where manufacturers might delay or scale back critical equipment purchases for R&D.

The 2025 budget fixes this. Now, eligible capital expenditures—machinery and equipment used directly in SR&ED—are back in at the prescribed rates. For manufacturers, this means:

Production line innovation is fully supported: If you’re modifying existing lines or developing new production processes, you can now claim both the engineering work and the equipment upgrades or purchases needed to test and implement your innovations.

Prototype development covers all costs: Creating prototype tooling, molds, or specialized manufacturing equipment—historically a big unclaimed expense—now qualifies when used for SR&ED.

Faster adoption of advanced technology: Investments in cutting-edge manufacturing tech like 3D printers, advanced sensors, or AI-powered quality control systems are eligible when used for experimental development.

This change is especially valuable for manufacturers who drive innovation through iterative equipment testing and modification—the heart of manufacturing R&D.

New SR&ED Opportunities for Public Companies

While Canadian-controlled private corporations have long been the main SR&ED beneficiaries, the 2025 changes bring major advantages to public manufacturers. Refundable credits are now available to public companies, removing a long-standing barrier.

Previously, public companies could only access non-refundable credits, which only helped if you owed taxes. For public manufacturers in growth mode or running temporary losses while investing in innovation, these credits had little immediate value. Now, refundable credits mean public manufacturers can get cash back—providing instant working capital to reinvest in innovation, regardless of profitability.

This levels the playing field and removes a structural disadvantage that made SR&ED less attractive for public manufacturers compared to private ones.

Why SR&ED Expertise Matters More Than Ever

With these expanded opportunities comes added complexity. The return of capital expenditures means more documentation and technical justification. Higher expenditure limits require better project tracking and financial integration. Public company provisions bring new qualification and documentation requirements.

This complexity means manufacturers face a key decision: manage SR&ED in-house, use a traditional accounting firm, or partner with SR&ED specialists.

The In-House Approach: Resource Limitations

Handling SR&ED internally—even with dedicated finance and R&D teams—brings real challenges. Manufacturers excel at building products, not navigating the technical and tax nuances of SR&ED. The program’s subjective language around technological uncertainty, systematic investigation, and experimental development requires specialized interpretation that most internal teams simply don’t have.

Plus, internal teams are often stretched thin and rarely have the bandwidth for the detailed documentation, technical write-ups, and financial analysis needed to maximize SR&ED claims. The result? Conservative claims that leave significant credits on the table—money that could drive further innovation.

Big 6 Accounting Firms: The Generalist Challenge

Large accounting firms offer SR&ED services, but as just one part of a broad menu that includes audit, tax planning, and consulting. For them, SR&ED is just another line item—not a core focus.

This generalist approach leads to predictable gaps:

Limited R&D specialization: Traditional accounting firms usually lack deep technical expertise in manufacturing. They may miss qualifying activities in complex innovation projects or struggle to clearly explain technological uncertainty to reviewers.

Manual, project-based engagement: Big 6 firms typically work on an annual, project-by-project basis using mostly manual processes. There’s no continuous tracking of eligible activities, so they end up reconstructing claims at year-end—missing qualifying work and burdening your team with last-minute info requests.

Weak audit defense: When CRA audits happen, traditional firms often lack the specialized SR&ED audit experience and government relationships needed for strong defense. Their broad focus means less robust documentation and weaker support if your claim is challenged.

Enterprise-only focus: Many large firms prioritize big enterprise clients, offering limited support to mid-market manufacturers—the innovation backbone of Canadian manufacturing.

The Boast Approach: Specialized Excellence

Boast is built entirely around SR&ED and R&D tax credits. This laser focus creates unique advantages for manufacturers:

Deep manufacturing expertise: Our team understands manufacturing innovation—from advanced materials to process optimization to Industry 4.0. We speak your technical language and spot eligible activities that generalists miss.

Technology-driven efficiency: Our platform connects financial, project, and technical data in a continuous system of record. Instead of scrambling at year-end, we track eligible activities in real time—reducing your team’s workload and capturing more eligible work. This is especially valuable for capital-intensive projects where tracking equipment use and modifications is key.

Full audit protection: We don’t just prepare claims—we build audit-ready documentation from day one, with SOC II compliance. Our team has decades of combined experience with CRA reviewers and successful audit defense, so you’re covered if questions arise.

Maximizing new opportunities: As specialists, we help manufacturers fully leverage the 2025 enhancements—identifying newly eligible capital expenditures, optimizing claims under the doubled expenditure limit, and navigating new public company rules.

Strategic partnership, year-round: While other providers disappear after filing, we deliver ongoing value with continuous optimization, policy updates, and strategic SR&ED planning integrated with your broader innovation goals.

For manufacturers, the choice is clear: specialized expertise delivers higher returns, lower risk, and less internal strain than generalist firms or stretched in-house teams.

Manufacturing-Specific Opportunities Under the Enhanced SR&ED Program

The expanded SR&ED program creates unique opportunities across manufacturing sectors:

Advanced manufacturing and automation: Companies implementing robotics, IoT sensors, or AI-powered quality control can now claim both development salaries and the specialized equipment needed for testing and deployment.

Sustainable manufacturing innovation: Manufacturers developing cleaner processes, alternative materials, or energy-efficient methods can now recover the full cost of equipment upgrades and new technology needed for experimental work.

Product development and materials science: Developing new materials, improving durability, or enhancing performance often requires significant prototype tooling and testing equipment—all now fully SR&ED eligible.

Process optimization and Industry 4.0: Manufacturers driving systematic improvements with advanced analytics, digital twins, or smart manufacturing tech can claim both software development and the capital equipment that enables these innovations.

Custom manufacturing solutions: Job shops and contract manufacturers developing unique solutions for clients can now claim equipment and tooling costs alongside engineering time.

How Manufacturers Can Maximize SR&ED

To make the most of these new SR&ED opportunities, Canadian manufacturers should:

Audit current R&D: Review ongoing projects through the lens of the expanded SR&ED program, identifying newly eligible capital expenditures and activities that may now qualify.

Implement continuous tracking: Set up systems to capture SR&ED-eligible work and expenses throughout the year, instead of scrambling at year-end.

Engage SR&ED specialists early: Partner with experts who understand manufacturing innovation and can help structure projects to maximize claims while maintaining technical rigor.

Plan strategically: Integrate SR&ED planning into your broader innovation and capital investment strategy—recognizing the enhanced program as a major funding source for manufacturing R&D.

Document thoroughly: Build strong technical narratives and keep detailed records of technological uncertainties, systematic investigations, and experimental processes—especially for capital expenditures.

The Bottom Line for Canadian Manufacturers and SR&ED

The 2025 SR&ED enhancements are a historic opportunity for Canadian manufacturers driving innovation. With a doubled expenditure limit, renewed capital expenditure eligibility, and expanded access for public companies, manufacturers now have unprecedented access to non-dilutive innovation capital.

But opportunity alone doesn’t create value. The expanded program’s complexity means you need specialized expertise to fully capture all available credits and protect your claims in case of an audit. For manufacturers, partnering with dedicated SR&ED specialists like Boast ensures you get the maximum return—without overburdening your internal teams or leaving significant money unclaimed due to conservative filings.

Canadian manufacturing has always stayed ahead by innovating. With the 2025 SR&ED enhancements, the government is stepping up its support for that innovation. Manufacturers who take advantage of these new measures—especially when working with experts who understand both the SR&ED program and the realities of manufacturing R&D—can speed up their innovation projects and access substantial non-dilutive capital.

The real question isn’t whether you should pursue SR&ED under the new rules. For innovative manufacturers, it’s about how to get the most out of it.

Ready to unlock your manufacturing company’s full SR&ED potential with the 2025 enhancements? Boast brings deep manufacturing know-how and advanced technology to help you maximize your R&D tax credits—while keeping your team’s workload to a minimum. Get your free SR&ED assessment today.