R&D vs SR&ED 


Although they sound very similar, Scientific Research & Experimental Development (SR&ED) and Research & Development (R&D) are not equals. Companies have always undertaken innovation, but when it comes to eligibility and access to tax incentives, not all innovations can be placed on the same level – or added to the same group.  

Distinguishing the difference  

The SR&ED program is currently the most important innovation support program of the Government of Canada, and must meet two different requirements to be valid:   

  • The work must be conducted for the advancement of scientific knowledge or to achieve a technological advancement  
  • The work must be a systematic investigation or search carried out in a field of science or technology by utilizing experiment or analysis.  

An advancement, as defined by the Government of Canada, is the generation or discovery knowledge that advances the understanding of science or technology. A discovery is necessary when it’s unknown or uncertain whether a particular result can be achieved due to an insufficiency in the scientific or technological knowledge base that existed at the start of the project. In other words, it is active research and experimentation, which form a specific part of the R&D process, without including the full project. Therefore, not all R&D activity can be classified as SR&ED.  

How can we define it?  

R&D brings a broader connotation, and there is no guarantee that something that fits into the R&D process will necessarily fit into SR&ED criteria – that’s why it’s important to pay attention to the requirements to make sure your project is eligible. To be considered an SR&ED project, your work shall aim to achieve scientific or technological advancement, having a systematic investigation or research, including formulation and recorded testing of the hypotheses through experimentation and analysis.  

While both encompass innovation and its ramifications, it can be said that R&D can focus on finding new ways to renew the industry and testing existing solutions for it – or approaching and developing them in a new way – SR&ED must contribute to greater technical knowledge of its sector, differentiating selection and testing from practical experimental development. SR&ED is then a subset of R&D, where you actively research and experiment to overcome a technological or scientific obstacle.   

How can we help you?  

FI Group is a global tax consultancy that helps multiple industries obtain tax credits and incentives. With more than 1,800 qualified employees, Fi Group has specialists from many fields who can identify qualified activities for your business. We specialize in helping companies finance innovation and secure funding for their R&D activities through the comprehensive management of R&D Tax credits.