Your Essential Resource for Canada’s Enhanced R&D Program
Introduction
If you lead an innovative business in Canada, 2026 opens up exceptional opportunities to access non-dilutive funding through the Scientific Research and Experimental Development (SR&ED) program. With the most significant improvements in over ten years now in place—including a doubled expenditure limit to $6 million and the return of capital expenditure eligibility—Canadian companies can secure much more capital to drive their R&D projects.
But only if you understand the program and know how to navigate it effectively.
What is SR&ED?
SR&ED is Canada’s largest federal tax incentive program for research and development. Each year, it delivers over $4.5 billion to more than 20,000 businesses carrying out eligible R&D in Canada. Unlike grants or loans, SR&ED provides tax credits that can reduce your tax payable or, for many companies, generate cash refunds.
The program rewards companies that tackle technological uncertainties through systematic investigation. Whether you’re developing new products, improving processes, or solving complex technical challenges, SR&ED can help you recover a significant portion of your R&D costs.
THE 2025 OPPORTUNITY
With the 2025 budget changes, the maximum refundable credits have doubled from $1.05 million to $2.1 million per year for eligible companies. For the first time, public companies can also access these enhanced refundable credits.
Budget 2025: Four Transformational Changes
1. Expenditure Limit Doubled to $6 Million
WHAT’S NEW
The annual expenditure limit for the enhanced 35% refundable tax credit has increased from $3 million to $6 million—even higher than the initially announced $4.5 million increase.
WHY THIS MATTERS
For Canadian-controlled private corporations (CCPCs) with significant R&D, this means up to $2.1 million in refundable credits each year, compared to the previous $1.05 million maximum. That’s a potential $1.05 million boost to your annual cash flow.
EXAMPLE
A software company claiming $3M in qualifying expenditures previously received $1.05M in refundable credits. If they can identify $6M in qualifying activities, their refundable credits double to $2.1M—what they could receive in future years.
2. Public Companies Now Eligible for Enhanced Credits
WHAT’S NEW
Canadian public corporations can now access the enhanced 35% refundable tax credit on up to $6 million of qualifying expenditures. Previously, public companies were limited to a 15% non-refundable credit.
WHY THIS MATTERS
This is a game-changer. Public companies conducting R&D can now receive actual cash back from their innovation investments, not just a reduction in taxes owed. For public companies in pre-revenue or low-margin phases, this cash flow improvement is significant.
ELIGIBILITY REQUIREMENTS
3. Capital Expenditures Return After 11 Years
WHAT’S NEW
Capital expenditures are once again eligible for both SR&ED deductions and investment tax credits for property acquired on or after December 16, 2024.
WHY THIS MATTERS
R&D equipment, machinery, and apparatus—often the largest innovation investments—now qualify again for major tax benefits. This is a breakthrough for manufacturers and companies with equipment-heavy R&D.
WHAT QUALIFIES
IMPORTANT
Property must be acquired after December 16, 2024, and used substantially (?90%) for eligible SR&ED work in Canada.
4. Higher Phase-Out Thresholds for Growing Companies
WHAT’S NEW
The taxable capital phase-out thresholds have increased from $10–50 million to $15–75 million. CCPCs can now also choose between taxable capital and gross revenue calculations.
WHY THIS MATTERS
Mid-sized and scaling companies can keep access to the enhanced 35% refundable credits longer as they grow. Companies can also choose the calculation method that works best for them.
PLUS: SIMPLIFIED ADMINISTRATION STARTING APRIL 2026
The Three Pillars of SR&ED Eligibility
Despite the enhanced benefits in Budget 2025, the core eligibility criteria remain unchanged. Your work must show:
1. Technological Advancement
Your project must create new knowledge that advances science or technology. This isn’t about using off-the-shelf technology—it’s about creating something truly new or improving what exists beyond current capabilities.
KEY QUESTION
Does this work advance knowledge in the field in a way that a qualified professional would consider significant?
EXAMPLES THAT QUALIFY
EXAMPLES THAT DON’T
2. Scientific or Technological Uncertainty
You must face challenges where existing methods and knowledge can’t predict the outcome. A qualified professional in your field shouldn’t be able to solve the problem with standard practice alone—new knowledge is needed.
KEY QUESTION
Could a qualified professional in this field easily determine the solution using standard practice?
EXAMPLES OF TECHNOLOGICAL UNCERTAINTY
IMPORTANT
Uncertainty must be technological—not business risk or market uncertainty. Difficulty alone isn’t enough—there must be a need for new knowledge.
3. Systematic Investigation
Your approach must be methodical: document your processes, identify uncertainties, form hypotheses, run experiments or analyses, and draw logical conclusions from your results.
KEY QUESTION
Did we use a structured approach to problem-solving, with hypothesis formation, testing, and documented learnings?
ELEMENTS OF SYSTEMATIC INVESTIGATION
IMPORTANT
Success isn’t required. SR&ED recognizes that even “failed” experiments contribute to technological progress. What matters is the systematic approach to overcoming uncertainty.
What You Can Claim: Eligible Expenditures
SR&ED lets you claim several categories of expenditures directly related to eligible R&D work:
Salaries and Wages
What qualifies: Gross salaries and wages for employees directly involved in SR&ED, plus related employer contributions (CPP, EI, health taxes, workers’ compensation).
Key requirement: Employees must directly perform, supervise, or support eligible SR&ED work in Canada. Track time spent on qualifying activities throughout the year.
Materials Consumed in SR&ED
What qualifies: Raw materials, components, and supplies used up or transformed during SR&ED work, including materials used in prototypes (if not sold or put to commercial use).
Key distinction: Materials must be consumed during the R&D process—materials used in commercial production don’t qualify.
Subcontractor Payments (80% Rule)
What qualifies: 80% of arm’s length payments to subcontractors for SR&ED performed on your behalf in Canada.
Key requirements: Written contract specifying SR&ED work, subcontractor must be at arm’s length (not a related party), clear documentation of work performed.
Overhead (Proxy Method)
What qualifies: Overhead costs can be claimed using the proxy method—55% of eligible salaries and wages automatically covers rent, utilities, equipment, and other overhead.
Example: If eligible SR&ED salaries total $500,000, the proxy method provides an additional $275,000 (55% × $500,000) for overhead.
Capital Expenditures (NEW for 2025)
What qualifies: Property acquired on or after December 16, 2024, used all or substantially all (?90%) for SR&ED in Canada—including equipment, machinery, apparatus, and lease costs.
Key requirements:
What doesn’t qualify: Equipment used for both R&D and production (unless ?90% R&D), general office equipment, vehicles (except specialized R&D vehicles), buildings (separate treatment under productivity super-deduction).
How to Calculate Your SR&ED Tax Credits
Understanding how credits are calculated helps you estimate your potential benefits and make informed R&D investment decisions.
Credit Rates
CANADIAN-CONTROLLED PRIVATE CORPORATIONS (CCPCs)
PUBLIC CORPORATIONS (NEW FOR 2025)
OTHER CORPORATIONS
Example Calculations
SCENARIO 1
CCPC WITH $4M IN QUALIFYING EXPENDITURES
SCENARIO 2
CCPC WITH $8M IN QUALIFYING EXPENDITURES
SCENARIO 3
PUBLIC CORPORATION WITH $5M IN QUALIFYING EXPENDITURES (NEW)
Provincial Credits: Stacking Opportunities
Most provinces and territories offer additional R&D tax credits that work alongside federal SR&ED. While provincial credits reduce federal SR&ED expenditures, the net benefit remains significant.
EXAMPLE (BC-BASED CCPC WITH $1M IN QUALIFYING R&D)
Documentation: The Key to a Successful Claim
Good documentation is what separates a full, successful SR&ED claim from a stressful CRA review. The saying “if you didn’t write it down, it didn’t happen” is especially true for SR&ED.
What You Should Keep
Technical Documentation
Financial Documentation
Supporting Documentation
Best Practices
1. Document as you go—not after the fact. 2. Be specific about technical challenges and what you tried. 3. Record both successes and failures (show real uncertainty). 4. Keep financial and technical records clearly connected. 5. Track SR&ED time throughout the year, not just at the end.
FOR CAPITAL EXPENDITURES (NEW)
Keep purchase agreements showing when assets were acquired, asset registers tracking SR&ED vs. non-SR&ED use, usage logs proving at least 90% SR&ED use, and records if the asset is sold or repurposed.
Common Mistakes to Avoid
1. Underclaiming
Many companies miss out on credits for failed experiments, optimization, integration challenges, and infrastructure improvements that required experimentation.
SOLUTION
Have specialists review all your R&D activities to spot eligible work you might overlook.
2. Weak Documentation
Missing or incomplete documentation puts your claim at risk. Companies with poor records often see their claims cut by 20-30% after CRA review.
SOLUTION
Make documentation part of your daily workflow. Record details as you work, focus on technical specifics, and document the process—not just the results.
3. Overlooking Capital Expenditures (NEW for 2025)
With capital expenditures now eligible, many companies miss out on major credits for equipment and machinery.
SOLUTION
Review all equipment bought after December 16, 2024. Track SR&ED use to meet the 90% threshold. Keep strong records of purchases and usage.
4. Poor Time Tracking
You can’t support salary claims without solid time tracking. Estimates made after the fact carry less weight than records kept in real time.
SOLUTION
Track time throughout the year. Separate SR&ED from other activities. Use project management tools that capture time data.
5. Missing the Deadline
If you don’t file within 18 months of your year-end, you lose your entire claim—no exceptions, no extensions.
SOLUTION
Mark your deadline now. Start your claim 4-6 months before it’s due. Gather documentation all year long.
The Claims Process and Timeline
Filing deadline: 18 months after your tax year end
Example: Tax year ending December 31, 2025 = SR&ED claim due June 30, 2027
CRA REVIEW PROCESS
WHAT TRIGGERS A FULL REVIEW
NEW ADMINISTRATIVE IMPROVEMENTS (APRIL 2026)
Why Work with Boast?
The improved SR&ED program brings more opportunity than ever—but getting the most out of it takes real expertise. That’s where
Boast delivers value that generic accountants and tech-only firms can’t match:
R&D-First Focus
SR&ED isn’t a side offering for us—it’s our main focus. Our team brings decades of experience working directly with government agencies and knows exactly what it takes to maximize your return.
Technology + Human Expertise
While tech-only firms rely on automation and big accounting firms use manual processes, Boast blends advanced technology with experienced R&D tax credit specialists. Our platform automates data collection and qualification, while our experts fine-tune every claim for maximum value.
The claim process with Boast was smooth and much easier than last year. I feel very confident about the claim we’re submitting.”
— BLUE ECONOMY CUSTOMER WHO SWITCHED FROM THEIR ACCOUNTING PARTNER
Built-in Audit Protection
Our platform creates thorough documentation from day one, with SOC II compliance, tracking every eligible activity in detail—so you’re ready for any CRA review. We have a strong track record in audit defense because we build audit-proof documentation into the process from the start.
Maximizing the 2025 Enhancements
With capital expenditures back and spending limits doubled, there’s more complexity—and more opportunity—than ever. Our experts help you:
Our Track Record
Since 2011, Boast has helped over 1,700 businesses across North America secure more than $625 million in R&D tax credits—from startups to public companies in every industry.
Your Next Steps
Immediate Actions (Next 30 Days)
Assess Your Opportunity
Review Your Documentation
Identify All Eligible Activities
Get Expert Guidance
With the new program’s complexity and opportunity, professional advice often pays for itself many times over. Companies working with specialists typically find 25-40% more eligible activities than they would alone.
Book a free consultation with Boast’s SR&ED experts to:
Conclusion
The 2025 Budget’s SR&ED improvements are the biggest expansion of Canada’s R&D tax credit program in over a decade. With:
The companies that will benefit most are those who understand what qualifies, build strong documentation from the start, and optimize across all available innovation funding programs.
The real question isn’t whether to claim SR&ED—it’s whether you’re claiming everything you’re entitled to, with the documentation and expertise to maximize and protect your credits.
Boast specializes in helping organizations claim and access eligible R&D tax credits, minimizing audit risks and time-consuming processes in Canada and the United States. Boast combines in-house technical and R&D tax expertise with the latest AI technology to help companies effortlessly navigate the complexities of tax credits, enabling them to focus on what they do best: Innovate.
Since Boast was founded in 2011, we’ve helped over 1,700 businesses across North America unlock more than $625 million in innovation capital to build better products, extend their runway, and drive world-changing innovation.
This guide covers SR&ED program changes for tax years starting on or after December 16, 2024, as announced in Budget 2025. For the latest details and personalized advice, consult qualified SR&ED specialists.
