5 questions to qualify your SR & ED work

The Scientific Research and Experimental Development (SR & ED) Vote is Canada’s highest paying tax program. First, qualify your projects for this program. Let’s take a look at how the Canada Revenue Agency (CRA) assesses your work.

This page consists of excerpts from the “Eligibility of Work for SR&ED Investment Tax Credits Policy”. This policy is taken from the CRA website.

In addition, we provide you with a link to other pages from our blog for a practical view about answering these questions.

In general

Determining whether there are SR & ED activities means that there is:

“systematic investigation or search that is carried out in a field of science or technology by means of experiment or analysis and that is [Note (a)] (c) experimental development, namely, work undertaken for the purpose of achieving technological advancement for the purpose of creating new, or improving existing, materials, devices, products or processes, including incremental improvements thereto,“

Note (a) Basic research and (b) Applied research are rarely applicable in the real world.

All that sounds complicated, is it? CRA now uses five questions to qualify your projects.

Determine the eligibility of your projects : Five questions for SR & ED

The Canada Revenue Agency (CRA) uses the following five questions to determine whether your work meets the definition of SR & ED. You must respond positively to the 5 questions to qualify your SR & ED activities.

1- Was there a scientific or technological uncertainty?

Scientific or Technological Uncertainty: The probability of achieving a given goal or result, or how to achieve it, can not be known or determined in advance based on experience or scientific or technological knowledge usually available.

2- Has the effort been to formulate hypotheses specifically aimed at reducing or eliminating this uncertainty?

A hypothesis is an idea, in accordance with known facts. It serves as a starting point for a comprehensive study to prove or disprove this idea.

3- Was the overall approach adopted consistent with a survey or systematic search?

This includes the formulation and testing of hypotheses through experiments or analyzes.

Investigation or systematic research is an approach involving:

• defining a problem,
• the formulation of a hypothesis to solve the problem,
• planning and carrying out experiments or analyzes to verify the hypothesis, and
• the development of logical conclusions based on the results.

4- Has the global approach been undertaken for the purpose of achieving scientific or technological progress?

Scientific or technological advancement is the generation of information or the discovery of knowledge that contributes to the understanding of scientific relationships or technology.

5- Finally, was the history of the hypotheses tested and the results retained as work progressed?

A record of assumptions, tests and results should be kept during the work. For example, it is expected that the work will be recorded during the year to clearly indicate why and how it fits into the overall project.

In conclusion, these questions are essential to qualify your SR & ED projects. Check them BEFORE preparing your claim.

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