SR&ED after Bill C-15: who newly qualifies

Bill C-15 widened SR&ED — the scientific research and experimental development credit — in two specific ways, and both are backdated. Capital expenditures are eligible again, after years in which only current costs counted: test equipment, development hardware, a rig built to try something on. And the enhanced 35% credit, which used to disappear as a corporation’s taxable capital grew, now phases out over a taxable-capital range of C$15 million to C$75 million. Both apply to expenditures made on or after December 16, 2024. The bill became law on March 26, 2026.

So for most owners the first question is not whether to start claiming this year. It is whether you have already spent money that qualifies and booked it as something else. Two groups newly qualify: corporations that grew past the old taxable-capital line and stopped claiming, and anyone who bought test or development equipment since late 2024 and put it straight onto a depreciation schedule.

What SR&ED actually pays for

SR&ED pays for resolving technological uncertainty. It does not pay for building things, however difficult the build was. That distinction settles most claims before any arithmetic starts.

The working test is roughly this. You set out to do something and standard practice could not tell you whether it would work, or how to make it work. You formed a view, tried it, it failed or half-failed, you changed something and tried again, and you recorded what happened. That is a systematic investigation, and the labour and materials consumed in it are what the credit is aimed at.

Writing a feature to a specification is not that. Neither is configuring a well-documented tool, porting code because the old platform was deprecated, or the ordinary debugging after any release. Routine engineering sits outside, however skilled. Owners hear “35%” and reach for the whole payroll; the honest version is that a real claim usually covers a slice of a few people’s time over a few weeks, and the slice is the part where nobody knew the answer.

The credit can arrive as cash, which is why loss years still matter

For a Canadian-controlled private corporation, the enhanced rate on qualifying SR&ED expenditures is 35%, and on current expenditures it is refundable — the CRA pays it out whether or not the corporation owes tax. A company losing money while it builds something still gets cash back on the salaries.

Compare the two levers. A dollar of ordinary deductible expense reduces federal tax by 9 cents inside the small-business limit for an eligible CCPC in 2026 — 9% on the first C$500,000 of active business income — with provincial tax on top. A dollar of qualifying SR&ED expenditure earns a 35-cent federal credit and is generally deductible as well. The gap is why how the spending is classified matters more than how large it is.

Three limits sit around that. The enhanced rate applies only up to an annual expenditure limit, shared across an associated group; above it a lower basic rate applies, and that one is generally not refundable for a CCPC in the same way. How much of the credit arrives as cash rather than as a reduction of tax payable also depends on the kind of expenditure. And the credit is not tax-free — claiming it either reduces the pool of deductible SR&ED expenditures or is brought back into income, so 35 cents of credit is worth less than 35 cents in your hands.

Taxable capital used to end the conversation

The enhanced rate is ground down as a corporation gets bigger, measured by taxable capital employed in Canada — a balance-sheet measure of the corporation’s capital base, aggregated across associated corporations rather than read off one company’s books. Under Bill C-15 the grind runs from C$15 million to C$75 million. Below the band the enhanced rate applies in full; above it, it is gone; in between you get part of it.

Widening the band is the quiet half of this change. Nobody writes to tell you that you are back inside the band; it reads as an accounting technicality until someone re-runs the taxable-capital figure.

Capital expenditures count again, and the date is December 16, 2024

For years only current expenditures counted: salaries and wages of the people doing the work, materials consumed or transformed, payments to contractors doing it for you. A machine bought to test on was capital, so it went onto a depreciation schedule and produced CCA — capital cost allowance, the tax system’s version of depreciation — and nothing else.

Bill C-15 puts capital expenditures back in, for expenditures made on or after December 16, 2024. In practice that means a test bench · an environmental chamber · development hardware bought to prove out a design rather than to ship product.

Two complications travel with it. Equipment used partly for SR&ED and partly for ordinary production has its own allocation rules. And a dollar cannot both support a SR&ED claim and be written off again as CCA, including under the immediate-expensing and accelerated-CCA measures in the same bill — so for some assets there is a genuine choice, and it is arithmetic best done before the return. The date test runs on the expenditure, not on the invoice in your folder. For something ordered in one year and delivered in another, that is a question to ask rather than assume.

A worked example: one test rig, two purchase dates

Illustrative, round numbers, June 30 year-end, because the date this turns on falls mid-December. In the year to June 30, 2025 a development shop spends C$200,000 of salary on the stretch of a project where nobody knew whether the approach would work, and buys a C$60,000 rig in the same year to test it on. Assume a CCPC, taxable capital below C$15 million, and expenditures inside the annual limit, so the enhanced rate applies in full.

Bought on December 20, 2024, both amounts are in play. C$260,000 of qualifying expenditure at 35% is C$91,000 of federal credit in a year the shop lost money. Bought on December 10, 2024, only the C$200,000 counts — C$70,000 — and the rig is left to depreciate at whatever its class allows.

Four things that arithmetic leaves out, all of which move the number. Overhead attributable to the work is claimable, either by tracing actual costs or by a prescribed proxy calculated from qualifying salaries, and the choice is made on the return. How much of the C$91,000 arrives as cash rather than as a reduction of tax payable turns on the split between the salary and the rig. The credit is itself taxed, so C$91,000 of credit is not C$91,000 of value. And provincial research credits generally stack on top of the federal one, each province setting its own.

What survives a review is what you wrote down at the time

A SR&ED review is not an argument about whether the work was hard. It is a request to show, from records made while the work was happening, what you did not know and how you went about finding out.

• Track time to the project and the phase, not to the client. “ACME — 6h” proves nothing. “ACME — retry queue experiment, third approach” is evidence.
• Keep the failures. Abandoned branches, dead prototypes and the ticket where someone wrote “this doesn’t work, trying X instead” are the strongest documents in the file, because they are the uncertainty in writing.
• Date it and leave it where it was made — commits, issue trackers, lab notebooks, meeting notes. A reconstruction written the following spring reads exactly like a reconstruction.
• Identify capital purchases when you buy them. A ledger line reading “equipment” will not tell anyone, two years on, that the rig was bought to run experiments on.

None of that is extra work if it starts on day one, and all of it is extra work if it starts in June. The claim also carries its own filing deadline, a fixed period after your year-end, and the CRA has very limited room to accept a late one. A claim that was perfectly good and filed late is simply gone.

What Cadence does

We do not prepare SR&ED claims. That work goes to specialists — it is a technical-writing job as much as a tax one — and when the numbers look worth their time we say so and work alongside whoever you engage. What we do is keep the spending visible while it is still fresh: where we keep the books, capital purchases get coded so they can be found later and contractor invoices say what the work actually was; where you keep your own, we tell you what the specialist will need before the year closes. The corporate side stays with us: the T2 and the credit as it lands on it, and the instalments that shift once a refundable credit is in the picture. Most of the owners we do this for are software and IT businesses. The rest of what Bill C-15 moved is in what actually changed for owner-managers in 2026.