Canada’s 2025 Federal Budget has delivered a transformative package for manufacturers pursuing innovation. The expanded Scientific Research and Experimental Development (SR&ED) program represents the most significant enhancement to the country’s flagship innovation incentive in years, and manufacturing companies stand to benefit most dramatically.

The headline numbers tell an impressive story: The expenditure limit has doubled from $3 million to $6 million (surpassing even the $4.5 million many analysts anticipated), capital expenditures are once again eligible after years of exclusion, and public companies now have access to refundable credits previously reserved for CCPCs. But beyond these figures lies a strategic opportunity for Canadian manufacturers to substantially accelerate their innovation initiatives without diluting equity or straining existing teams.

Why Manufacturing Is Positioned to Win Big with SR&ED

Manufacturing has always been a natural fit for SR&ED, but these enhancements align particularly well with how modern manufacturers innovate. Unlike pure software development that primarily incurs salary expenses, manufacturing R&D inherently involves significant capital investment, including new equipment, specialized tooling, prototype machinery and production line modifications. The reinstatement of capital expenditure eligibility fundamentally changes the SR&ED value proposition for manufacturers.

Consider a mid-sized manufacturer developing a novel automated assembly process. Under the previous framework, only the salaries of engineers working on the project would qualify. Now, the specialized robotics equipment, custom sensors, and modified production machinery all become eligible expenses. For capital-intensive manufacturing innovation, this dramatically expands the accessible credit pool.

The doubled expenditure limit compounds this advantage. Canadian manufacturers undertaking substantial innovation projects—whether developing advanced materials, implementing Industry 4.0 technologies, or creating more sustainable production methods—can now capture significantly more of their qualified expenditures at the enhanced refundable rate of 35%. For a CCPC manufacturer maximizing the new $6 million limit, this translates to up to $2.1 million in refundable tax credits annually.

The Capital Expenditure Game-Changer for SR&ED

The return of capital expenditures deserves special attention. From 2014 until now, SR&ED excluded capital costs, a policy that disproportionately disadvantaged manufacturers whose innovation inherently requires equipment investment. This created a perverse incentive structure where manufacturers might delay or scale back equipment purchases critical to their R&D efforts.

The 2025 budget corrects this imbalance. Qualified capital expenditures—machinery and equipment used directly in SR&ED work—are once again eligible at the prescribed rates. For manufacturing companies, this means:

Production line innovation becomes fully supported: Manufacturers modifying existing lines or developing new production processes can now claim both the engineering work and the equipment modifications or acquisitions necessary to test and implement innovations.

Prototype development captures full costs: Creating prototype tooling, molds, or specialized manufacturing equipment (historically a significant unclaimed expense) now qualifies when used for SR&ED purposes.

Advanced technology adoption accelerates: Investments in cutting-edge manufacturing technologies like additive manufacturing equipment, advanced sensors, or AI-enabled quality control systems qualify when deployed for experimental development.

This change particularly benefits manufacturers pursuing technological uncertainty through iterative equipment testing and modification, which is the essence of manufacturing innovation.

Public Company Provisions Open New Doors for SR&ED

While Canadian-controlled private corporations have historically been the primary SR&ED beneficiaries, the 2025 enhancements extend significant benefits to public manufacturers. The introduction of refundable credits for public companies eliminates a longstanding disparity.

Previously, public companies could only access non-refundable investment tax credits, useful only against tax liability. For public manufacturers in growth phases or experiencing temporary losses while investing heavily in innovation, these credits offered limited immediate value. The new refundable provisions mean public manufacturers can receive cash refunds, providing immediate working capital to reinvest in ongoing innovation regardless of current profitability.

This levels the playing field and removes a structural disadvantage that made SR&ED less attractive for publicly traded manufacturers compared to their private competitors.

Why Expertise Matters More Than Ever for SR&ED

These expanded opportunities come with increased complexity. The reinstated capital expenditure provisions require careful documentation and technical justification. The higher expenditure limits demand more sophisticated project tracking and financial integration. The public company provisions introduce new qualification criteria and documentation requirements.

This complexity creates a critical choice point for manufacturers: handle SR&ED internally, engage traditional accounting firms, or work with specialized SR&ED partners.

The Internal Approach: Resource Constraints

Managing SR&ED internally—even with dedicated finance and R&D teams—presents significant challenges. Manufacturing companies excel at making products, not navigating the nuanced technical and tax requirements of SR&ED claims. The program’s subjective language around technological uncertainty, systematic investigation, and experimental development requires specialized interpretation that most internal teams lack.

Moreover, internal teams facing operational demands rarely have capacity for the detailed documentation, technical narrative development, and financial analysis required to maximize SR&ED claims. The result is often conservative claims that leave substantial eligible credits unclaimed money that could fuel further innovation.

Big 6 Accounting Firms: The Generalist Problem

Large accounting firms offer SR&ED services, but as part of a broad service portfolio alongside audit, tax planning, and consulting. For these firms, SR&ED represents one line item among many, not their core focus.

This generalist approach creates predictable gaps:

Limited R&D specialization: Traditional accounting firms typically lack deep technical expertise in manufacturing processes and technologies. They may struggle to identify qualifying activities in complex manufacturing innovation or effectively communicate technological uncertainty to reviewers.

Manual, project-based engagement: Big 6 firms typically engage on an annual, project basis using largely manual processes. There’s no continuous platform tracking qualified activities throughout the year, resulting in reconstruction efforts that miss qualifying work and burden internal teams with extensive retrospective information requests.

Inadequate audit defense: When Canada Revenue Agency audits occur, traditional firms often lack the specialized SR&ED audit experience and government agency relationships necessary for effective defense. Their broad focus means weaker specialized documentation and less confident claim support when challenges arise.

Enterprise-only focus: Many large firms prioritize enterprise clients, providing limited support for mid-market manufacturers who represent the innovation backbone of Canadian manufacturing.

The Boast Approach: Specialized Excellence

Boast has built its entire operation around SR&ED and R&D tax credits. This singular focus creates distinct advantages for manufacturing clients:

Deep manufacturing expertise: Our team understands manufacturing innovation, from advanced materials development to process optimization to Industry 4.0 implementation. We speak the technical language of manufacturing and recognize qualifying activities that generalists miss.

Technology-enabled efficiency: Our platform integrates financial, project, and technical data into a continuous system of record. Instead of year-end reconstruction, qualifying activities are tracked in real-time, reducing internal team burden while capturing more eligible work. This approach particularly benefits capital-intensive manufacturing projects where equipment usage and modification tracking is critical.

Comprehensive audit protection: We don’t just prepare claims; we build audit-ready documentation from day one with SOC II compliance. Our team has decades of combined experience with CRA reviewers and successful audit defense, providing confident support when challenges arise.

Maximizing the new provisions: As specialists, we’re positioned to help manufacturers fully leverage the 2025 enhancements, identifying newly eligible capital expenditures, optimizing claims under the doubled expenditure limit, and navigating new public company provisions.

Strategic partnership beyond claims: While other providers disappear after claim submission, we provide year-round value with ongoing optimization, policy updates, and strategic SR&ED planning integrated with broader innovation initiatives.

For manufacturing companies, the choice is clear: specialized expertise delivers higher returns, lower risk, and less internal burden than generalist approaches or stretched internal resources.

Manufacturing-Specific Opportunities Under the Enhanced SR&ED Program

The expanded SR&ED framework creates particular opportunities across manufacturing sectors:

Advanced manufacturing and automation: Companies implementing robotics, IoT sensors, or AI-powered quality control can now claim both development salaries and the specialized equipment required for testing and implementation.

Sustainable manufacturing innovation: Manufacturers developing cleaner production processes, alternative materials, or energy-efficient methods can capture the full cost of equipment modifications and new technology adoption required for experimental work.

Product development and materials science: Developing novel materials, improving product durability, or enhancing performance characteristics involves significant prototype tooling and testing equipment, which are now fully SR&ED eligible.

Process optimization and Industry 4.0: Manufacturers pursuing systematic process improvements through advanced analytics, digital twins, or smart manufacturing technologies can claim both the software development and the capital equipment enabling these innovations.

Custom manufacturing solutions: Job shops and contract manufacturers developing novel approaches for unique customer requirements can now capture equipment and tooling costs alongside engineering time.

Practical Steps for Manufacturers Claiming SR&ED

To capitalize on these enhanced SR&ED provisions, Canadian manufacturers should:

Audit current R&D activities: Review ongoing projects through the expanded SR&ED lens, identifying newly eligible capital expenditures and activities previously considered borderline.

Implement continuous tracking: Establish systems to capture SR&ED-eligible work and expenditures throughout the year rather than reconstructing at year-end.

Engage specialized expertise early: Partner with SR&ED specialists who understand manufacturing innovation and can help structure projects to maximize eligible claims while maintaining technical rigor.

Plan strategically: Integrate SR&ED planning into broader innovation strategy and capital investment decisions, recognizing the enhanced program as a significant funding source for manufacturing R&D.

Document thoroughly: Build strong technical narratives and maintain detailed records of technological uncertainties, systematic investigations, and experimental processes; particularly for capital expenditures.

The Bottom Line for Canadian Manufacturing and SR&ED

The 2025 SR&ED enhancements represent a historic opportunity for Canadian manufacturers pursuing innovation. The doubled expenditure limit, reinstated capital expenditure eligibility, and expanded public company access create unprecedented access to non-dilutive innovation capital.

But opportunity without execution yields no value. The expanded program’s complexity demands specialized expertise to fully capture available credits while protecting claims during potential audits. For manufacturers, working with dedicated SR&ED specialists like Boast ensures maximum returns without overextending internal teams or leaving substantial money on the table through conservative claims.

Canadian manufacturing’s competitive advantage has always relied on innovation. With the 2025 SR&ED enhancements, the government has significantly increased its support for that innovation. Manufacturers who leverage these provisions strategically—partnered with specialists who understand both the program and the unique nature of manufacturing R&D—will accelerate their innovation initiatives while accessing substantial non-dilutive capital.

The question isn’t whether to pursue SR&ED under the enhanced framework. For innovative manufacturers, the question is how to maximize it.

Ready to unlock your manufacturing company’s full SR&ED potential under the 2025 enhancements? Boast combines deep manufacturing expertise with advanced technology to maximize your R&D tax credits while minimizing your team’s time commitment. Get your free SR&ED assessment today.