Your Essential Resource for Canada’s Enhanced R&D Program
Introduction
If you’re running an innovative business in Canada, 2026 brings unprecedented opportunities to unlock non-dilutive funding through the Scientific Research and Experimental Development (SR&ED) program. With the biggest enhancements in over a decade now in effect—including a doubled expenditure limit to $6 million and the return of capital expenditure eligibility—Canadian companies can access substantially more capital to fuel their R&D initiatives.
But only if they understand the program and navigate it properly.
What is SR&ED?
SR&ED is Canada’s largest federal tax incentive program supporting research and development. It provides over $4.5 billion annually to more than 20,000 businesses conducting eligible R&D work in Canada. Unlike grants or loans, SR&ED offers tax credits that can either 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 recover a significant portion of your R&D costs.
THE 2025 OPPORTUNITY
With Budget 2025’s enhancements, maximum refundable credits have doubled from $1.05 million to $2.1 million annually 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 CHANGED
The annual expenditure limit for the enhanced 35% refundable tax credit increased from $3 million to $6 million—even higher than the initially announced $4.5 million increase.
WHY IT MATTERS
For Canadian-controlled private corporations (CCPCs) conducting significant R&D, this means up to $2.1 million in refundable credits annually, compared to the previous maximum of $1.05 million. 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 be in following years.
2. Public Companies Now Eligible for Enhanced Credits
WHAT CHANGED
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 IT MATTERS
This is historic. Public companies conducting R&D can now receive actual cash back from their innovation investments, not just reductions in tax payable. For public companies in pre-revenue or low-margin phases, this transformation in cash flow is substantial.
ELIGIBILITY REQUIREMENTS
3. Capital Expenditures Return After 11 Years
WHAT CHANGED
Capital expenditures are once again eligible for both SR&ED deductions and investment tax credits, applying to property acquired on or after December 16, 2024.
WHY IT MATTERS
R&D equipment, machinery, and apparatus—often the most substantial innovation investments—once again qualify for significant tax benefits. This is transformational for manufacturers and companies with equipment-intensive 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. Extended Phase-Out Thresholds for Growing Companies
WHAT CHANGED
The taxable capital phase-out thresholds increased from $10-50 million to $15-75 million. Additionally, CCPCs can now choose between taxable capital and gross revenue calculations.
WHY IT MATTERS
Mid-sized and scaling companies can maintain access to enhanced 35% refundable credits longer as they grow. Companies can also elect the calculation method most beneficial to their situation.
PLUS: STREAMLINED ADMINISTRATION STARTING APRIL 2026
The Three Pillars of SR&ED Eligibility
Despite Budget 2025’s enhanced benefits, the core eligibility criteria remain unchanged. Your work must demonstrate:
1. Technological Advancement
Your project must generate new knowledge that advances the understanding of science or technology. This isn’t about using existing technology—it’s creating something genuinely new or improving existing capabilities beyond what’s currently known.
KEY QUESTION
Does this work advance understanding in the field in a way that a competent 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 cannot predict the outcome. A competent professional in your field shouldn’t be able to solve the problem using standard practice alone—new knowledge is required.
KEY QUESTION
Could a competent professional in this field readily determine the solution using standard practice?
EXAMPLES OF TECHNOLOGICAL UNCERTAINTY
IMPORTANT
Uncertainty must be technological, not business risk or market uncertainty. Difficulty alone doesn’t create uncertainty—the need for new knowledge does.
3. Systematic Investigation
Your approach must be methodical: documenting processes, identifying uncertainties, formulating hypotheses, conducting experiments or analysis, and reaching logical conclusions based on results.
KEY QUESTION
Did we follow a structured approach to problem-solving with hypothesis formation, testing, and documented learnings?
ELEMENTS OF SYSTEMATIC INVESTIGATION
IMPORTANT
Success is not required. SR&ED recognizes that even “failed” experiments contribute to technological advancement. What matters is the systematic approach to overcoming uncertainty.
What You Can Claim: Eligible Expenditures
SR&ED allows you to claim several categories of expenditures directly related to eligible R&D work:
Salaries and Wages
What qualifies: Gross salaries and wages for employees directly engaged 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 consumed or transformed during SR&ED work, including materials used in prototypes (if not sold or converted to commercial use).
Key distinction: Materials must be consumed during the R&D process—materials 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 arm’s length (not 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 captures 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).
Calculating Your SR&ED Tax Credits
Understanding how credits are calculated helps you estimate 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 is still substantial.
EXAMPLE (BC-BASED CCPC WITH $1M IN QUALIFYING R&D)
Documentation: The Foundation of Successful Claims
Proper documentation is the difference between successfully claiming your full SR&ED entitlement and facing challenges during CRA review. The adage “if it isn’t documented, it didn’t happen” applies powerfully to SR&ED.
What to Maintain
Technical Documentation
Financial Documentation
Supporting Documentation
Best Practices
1. Create documentation contemporaneously (during work, not after) 2. Be specific about technical challenges and solutions attempted 3. Include both successes and failures (demonstrate genuine uncertainty) 4. Maintain clear connection between financial records and technical work 5. Track SR&ED time throughout the year, not retrospectively.
FOR CAPITAL EXPENDITURES (NEW)
Maintain purchase agreements showing acquisition date, asset registers tracking SR&ED vs. non-SR&ED use, usage logs demonstrating ?90% SR&ED use, and disposition records if property is sold or converted.
Common Mistakes to Avoid
1. Claiming Too Little
Many companies significantly underestimate what qualifies. Failed experiments, optimization work, integration challenges, and infrastructure improvements requiring experimentation often qualify but go unclaimed.
SOLUTION
Comprehensive review of all R&D activities with specialists who can identify qualifying work you might miss.
2. Poor Documentation
Inadequate or missing documentation weakens claims and creates audit risk. Companies with poor documentation often face 20-30% claim reductions after CRA review.
SOLUTION
Build documentation into regular workflows. Create records during work, be specific about technical details, and document the process—not just outcomes.
3. Overlooking Capital Expenditures (NEW for 2025)
With capital expenditures newly eligible, companies miss significant credits on equipment and machinery.
SOLUTION
Review all equipment acquired after December 16, 2024. Track SR&ED use to meet ?90% threshold. Maintain robust acquisition and usage documentation.
4. Inadequate Time Tracking
Cannot support claimed salary expenditures without reasonable time tracking. Retrospective estimates are given less weight than contemporary records.
SOLUTION
Implement time tracking throughout the year. Distinguish SR&ED from non-SR&ED activities. Use project management tools with time data.
5. Missing the Deadline
Failing to file within 18 months of year-end forfeits your entire claim—there are no extensions or exceptions.
SOLUTION
Calendar the deadline immediately. Start claims process 4-6 months before deadline. Gather documentation throughout the year.
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 COMPREHENSIVE REVIEW
NEW ADMINISTRATIVE IMPROVEMENTS (APRIL 2026)
Why Work with Boast?
The enhanced SR&ED program offers unprecedented opportunities, but maximizing your benefits requires specialized expertise. Here’s where
Boast delivers value that generic accounting firms and tech-only competitors can’t match:
R&D-First Specialization
SR&ED isn’t a side service for us—it’s our core expertise. Our team has decades of combined experience working directly with government agencies and understands the nuanced requirements that separate maximum returns from mediocre ones.
Technology + Human Expertise
While tech-first competitors rely solely on automation and Big 6 firms use manual processes, Boast combines cutting-edge technology with seasoned R&D tax credit specialists. Our platform automates data collection and qualification while our experts optimize every claim for maximum value.
The claim formation process with Boast was great and a breeze in comparison to last year. I have a lot of confidence in the claim that’s being submitted.”
— BLUE ECONOMY CUSTOMER WHO SWITCHED FROM THEIR ACCOUNTING PARTNER
Built-in Audit Protection
Our platform creates comprehensive documentation from day one with SOC II compliance, tracking every qualified activity with the depth and detail needed for confident CRA defense. We maintain a strong success rate in audit defense because we build audit-proof documentation into the process, not as an afterthought.
Maximizing the 2025 Enhancements
With capital expenditures back and expenditure limits doubled, there’s more complexity—and more opportunity—than ever. Our experts help you:
Our Track Record
Since 2011, Boast has helped 1,700+ businesses across North America secure $625+ million in R&D tax credits, from startups to public corporations across all industries.
Your Next Steps
Immediate Actions (Next 30 Days)
Assess Your Opportunity
Review Documentation Practices
Identify All Qualifying Activities
Get Expert Guidance
Given the complexity and opportunity of the enhanced program, professional guidance often pays for itself many times over. Companies working with specialists typically identify 25-40% more qualifying activities than they would on their own.
Schedule a free consultation with Boast’s SR&ED experts to:
Conclusion
Budget 2025’s SR&ED enhancements represent the most significant expansion of Canada’s R&D tax credit program in over a decade. With:
The companies that will benefit most are those that understand the full scope of what qualifies, implement robust documentation from the start, and optimize strategically across all available innovation funding programs.
The question isn’t whether to claim SR&ED—it’s whether you’re claiming everything you’re entitled to, with the documentation and expertise needed 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’s founding in 2011, we’ve helped more than 1,700 businesses across North America tap into more than $625 million in innovation capital to build stronger products, extend their runway, and drive world-changing innovation.
This guide reflects SR&ED program enhancements effective for taxation years beginning on or after December 16, 2024, as announced in Budget 2025. For the most current information and personalized guidance, consult with qualified SR&ED specialists.
