SR&ED and innovation funding

A note before you read on

This page is general information, not tax advice. Corpshore is not a tax advisor, an accountant or a SR&ED consultant, and nothing here is a promise that any particular work will qualify or that any credit will be paid. SR&ED eligibility is fact-specific and is determined by the Canada Revenue Agency under the governing rules, not by a supplier. Read this as background to help you have an informed conversation with your own accountant or a qualified SR&ED advisor, who should confirm everything before you rely on it.

What SR&ED is

The Scientific Research and Experimental Development programme, known as SR&ED, is Canada's largest federal programme supporting research and development. It provides tax incentives, in the form of deductions and investment tax credits, to businesses that carry out eligible work in Canada. The programme is administered by the Canada Revenue Agency. It is broad by design and is not limited to laboratories or to particular industries, which is why software and AI development can fall within it when the work meets the eligibility tests.

The core idea is that the incentive rewards work that seeks to resolve a genuine technological uncertainty through a systematic investigation, rather than routine development where the outcome is known in advance. That distinction between advancing knowledge against real uncertainty and simply applying known techniques is at the heart of eligibility, and it is where most of the judgment in a claim sits.

Which software and AI work may qualify

In broad, general terms, software engineering and AI development performed in Canada may fall within SR&ED where the work attempts a technological advancement and confronts a technological uncertainty that could not be removed by routine means, resolved through a systematic process of experimentation and analysis. The categories below are the kinds of work that are commonly considered, offered as illustration rather than as a ruling on any specific project.

What generally does not qualify

Just as important is what usually falls outside the programme, because overclaiming here helps no one. Routine software development where the outcome is known and only effort is required, configuring or customising existing tools with established techniques, cosmetic or user-experience changes, market research, quality control and routine data collection are the kinds of activity generally treated as outside eligible SR&ED work, even when they are difficult or valuable. The test is technological uncertainty and advancement, not commercial importance or effort. Your accountant is the right person to apply that test to your specific work.

How outsourced Canadian development is generally treated

A common question is whether work done by an outsourced provider can support a claim, and how Canadian delivery differs from offshore in this respect. In general terms, SR&ED is oriented to work carried out in Canada, and expenditures for research and development performed outside Canada are treated far more restrictively than work performed inside it. That general orientation is one reason the location of your development matters to a claim, and it is a practical point in favour of doing qualifying development in Canada rather than offshore.

Where development is contracted to a provider, the treatment of the expenditure depends on the nature of the arrangement and on who is entitled to claim, which are precisely the areas where the rules are detailed and fact-specific. This is general information and not a statement of how your particular contract would be treated. The point to take from it is directional: performing qualifying development in Canada, with a provider whose delivery is Canadian and well documented, is more consistent with the programme's Canadian orientation than performing the same work offshore. Confirm the specifics, including who claims and how a contract payment is characterised, with your own accountant.

What documentation a claim requires

SR&ED claims live or die on contemporaneous documentation. The Canada Revenue Agency looks for evidence generated as the work happened, showing the uncertainty faced, the hypotheses tried, the experiments run and the results, rather than a narrative reconstructed after the fact. In general, a well-supported claim rests on records such as project descriptions of the technological objectives and uncertainties, records of the systematic work and its results, time and effort records tying people to eligible activities, and the financial records supporting the expenditures claimed.

The recurring theme is that the documentation should be produced during the work, not assembled at year end. A claim built on real, dated records of what was attempted and what was learned is far more defensible than one built on memory. Your accountant or SR&ED advisor will tell you exactly what to keep and in what form for your situation, and this general description is not a substitute for that advice.

How Corpshore delivery records support a claim

This is the practical part for a buyer using Canadian development. Corpshore does not prepare or file SR&ED claims and is not a SR&ED advisor. What well-run Canadian delivery does provide is the kind of contemporaneous delivery record that a claim relies on: dated records of the work performed, the technical work products, and the governance and reporting trail described elsewhere in this section. Where your development is performed in Canada by our teams, those delivery records exist as a by-product of running the work properly, and they can support the documentation your accountant assembles.

To be clear once more, this does not make any work eligible, and it is not tax advice. Eligibility is decided under the programme rules by the Canada Revenue Agency, and the claim is prepared by you and your advisor. What Corpshore contributes is Canadian delivery and a solid documentation trail, not a claim, an opinion or a guarantee. Consult your own accountant before treating any of this as applicable to your situation.

Consult your own accountant

One last time, plainly. This page is general information to help you understand SR&ED at a high level and have a better conversation with the right professional. It is not tax, accounting or legal advice. Corpshore is not a tax advisor and does not determine eligibility or prepare claims. SR&ED is fact-specific and administered by the Canada Revenue Agency under rules that change over time. Before you rely on anything here, or make a decision on the strength of it, consult your own accountant or a qualified SR&ED advisor.