Every year, the Canada Revenue Agency returns billions of dollars in cash refunds and tax credits to companies doing research and development work, and a meaningful share of it goes unclaimed. Not because the businesses doing the work aren't eligible, but because nobody on the team thought to call what they were doing “R&D.”
The core misunderstanding
Ask a founder if they do scientific research and most say no. Ask them if they spent the last two quarters trying to get a piece of software to do something it technically shouldn't be able to do, with no guarantee it would work, and the answer is usually yes. That gap, between how engineers describe their work and how the Scientific Research & Experimental Development (SR&ED) program defines eligible work, is where most unclaimed credits live.
SR&ED isn't limited to labs in white coats. It applies to:
- Software teams resolving genuine technical uncertainty through iteration, not just building a known feature with known tools.
- Manufacturers testing new production methods, material substitutions, or process changes with an uncertain outcome.
- Agribusinesses running field experiments on yield, crop resilience, or input efficiency under real, uncontrolled conditions.
What the CRA is actually looking for
A defensible claim answers three questions clearly: What was technologically uncertain at the outset? What systematic approach was used to try to resolve it? And what was actually learned, whether or not the attempt succeeded? Success isn't the requirement, a documented, systematic attempt is.
The strongest claims read like a lab notebook, not a marketing deck: what we didn't know, what we tried, what happened.
How the refund is actually calculated
Eligible SR&ED expenditures, salaries, materials consumed in the R&D, and a portion of overhead, are claimed alongside your T2 corporate tax return using form T661 and supporting schedules. For many Canadian-controlled private corporations, this generates a refundable investment tax credit, meaning cash back even if the company isn't yet profitable.
Why most consultants (including us) work on contingency
Because the value of a claim is entirely tied to the refund the CRA actually issues, most SR&ED consulting in Canada is priced as a contingency fee, typically 15% to 30% of the cash refund received, rather than an hourly rate charged regardless of outcome. It aligns the incentive correctly: the consultant only gets paid if the claim is both eligible and well-documented enough to survive review.
Consider a Winnipeg software startup that secures a $200,000 SR&ED refund after we map their project hours and write the technical narrative. At a 20% contingency fee, the firm's fee is $40,000, recovered entirely from money the business wouldn't otherwise have received, for work that was already happening.
The most common way claims go wrong
Not from ineligible work, from poor documentation. Teams that don't track time against specific technical objectives, or that write vague project summaries after the fact, make claims that are technically valid but nearly impossible to defend if the CRA asks questions. Mapping hours and writing the narrative properly, in real time or shortly after, is most of the actual work.
This article is general information, not tax advice specific to your situation. SR&ED eligibility depends on the facts of your projects and should be assessed individually.
Basis Of This Article
This is a short explainer rather than a researched brief. It sets out general practice on SR&ED refunds and is not sourced to specific published documents. This publication covers SR&ED in considerably more depth elsewhere, and a reader needing detail should start there and with CRA’s own programme guidance rather than with this page.
This article is provided for general informational purposes and is not tax advice. SR&ED eligibility and refund mechanics depend on the specific work performed and the corporation’s status; confirm your position with a qualified adviser.