Companies tend to organize themselves around the execution of business projects. The team will execute on a plan to fulfill the technical requirements for a particular business project in order to meet certain commercial objectives of the company. When a company wants to claim SR&ED on a project, they view their work through a commercial viewpoint and consider the business project to be a SR&ED project.
However, a SR&ED project will typically be a subset of the business project as not all work performed within the business project will be eligible. While the business project’s purpose is to achieve commercial success, the purpose of an SR&ED project is for the advancement of scientific knowledge or for achieving technological advancement. There will likely be portions of the work that was undertaken for commercial purposes and not related to the technological advancement required for SR&ED.
For example, style changes or user experience design work on the business project to meet user acceptance requirements would not be eligible for inclusion in the SR&ED project despite being part of the business project.
Bonus: click here to download this 20-page SR&ED Guide to learn everything you need to know to prepare a successful claim.
It is also possible for a business project to contain one or more SR&ED projects. This situation can arise where the experimental development consists of two different areas of the business project that are not interconnected. Whether the SR&ED projects meet the definition of SR&ED within the Income Tax Act is solely determined by examining the nature and characteristics of the work conducted.
As a result, the success or failure in terms of meeting the overall commercial goals of the project are irrelevant for qualifying the work conducted for SR&ED. The SR&ED project is purely focussed on the science and technology aspects – an advancement in the field of science or technology is a requirement for any project to be eligible for SR&ED. A qualified SR&ED consultant can guide you through reviews of your business projects to determine the extent of the SR&ED eligible work.
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