SR&ED Claims Process: Step-by-Step Guide (2024)

Filing an SR&ED (Scientific Research and Experimental Development) claim can seem daunting, but the process follows a predictable path. This guide walks you through each step from identifying eligible work to receiving your tax credit refund.

Overview: The SR&ED Timeline

Typical timeline for a December 31 fiscal year-end:

Phase	Timing	Key Activities
1. Project Identification	Ongoing - Jan	Review projects for eligibility
2. Documentation	Ongoing - Feb	Gather technical and financial evidence
3. Claim Preparation	Jan - Apr	Write narratives, calculate expenditures
4. Filing	Apr - Jun	Submit T661 with T2 return
5. CRA Review	Jun - Dec	Answer requests, potential site visit
6. Assessment	Sep - Jun+1	Receive NOA, refund processed

Critical Deadline: Claims must be filed within 18 months of your fiscal year-end. Miss this deadline and you forfeit eligibility.

Step 1: Project Identification

When to Start

Begin identifying SR&ED projects throughout the year, not just at year-end. Quarterly reviews work well for most companies.

What to Look For

Signals of potential SR&ED:

Technical challenges that required experimentation
Problems that couldn't be solved with existing knowledge
Multiple iterations or approaches tried
Failures that led to learning
Novel solutions developed

Evaluation Questions

For each potential project, ask:

Was there technological uncertainty?
- Did you know how to achieve the objective using standard practice?
- Did you need to experiment to find a solution?
Was there systematic investigation?
- Did you formulate hypotheses?
- Did you conduct tests or experiments?
- Did you analyze results and iterate?
Was there technological advancement?
- Did you gain new knowledge?
- Did you develop new capabilities?
- Did you achieve something beyond previous knowledge?

Common Sources of SR&ED

Review these areas:

Product development projects
Process improvement initiatives
Custom software development
Manufacturing optimization
Quality control innovations
Failed projects (often rich SR&ED)
Customer-driven technical challenges

Project List Creation

Document for each potential project:

Project name and description
Key technical personnel involved
Timeframe (start/end or ongoing)
Estimated expenditures
Brief description of uncertainty and approach

Step 2: Documentation Gathering

Technical Documentation

Collect existing evidence:

Design documents and specifications
Test plans and results
Meeting notes with technical discussions
Email threads discussing challenges
Code commits (for software)
Prototypes, samples, iterations

Financial Records

Gather expenditure evidence:

Payroll records for SR&ED personnel
Time sheets or allocation records
Material purchase invoices
Contractor invoices and contracts
Equipment purchases (if applicable)

Gap Assessment

Identify what's missing:

Do you have time allocation for personnel?
Are technical challenges documented?
Do you have test results?
Can you explain experimental iterations?

Fill gaps where possible: Some after-the-fact documentation is better than none, but contemporaneous records are strongest.

See complete documentation requirements →

Step 3: Claim Preparation

Form T661 Overview

The T661 is the core SR&ED claim form with three main parts:

Part 1: Claim Preparation Information

Who prepared the claim
NAICS code for your industry
Contact information

Part 2: Qualified SR&ED Expenditures

Financial calculations by category
Current year and prior year amounts

Part 3: Project Information

Technical narratives for each project
Most critical section for CRA review

Writing Technical Narratives

For each project, address:

1. Scientific or Technological Objectives

What were you trying to achieve?
What technological improvement was sought?

2. Technological Uncertainty

What didn't you know at the outset?
Why couldn't standard practice solve this?
What were the technical risks?

3. Systematic Investigation

What hypotheses did you formulate?
What tests or experiments did you conduct?
How did you analyze results?
What iterations occurred?

4. Technological Advancement

What new knowledge was gained?
What technical capabilities were achieved?
How was uncertainty resolved?

Narrative Best Practices

Do:

Be specific and technical
Explain the "why" not just the "what"
Describe uncertainties clearly
Include failed attempts
Use layperson-friendly language
Keep to 1-2 pages per project

Don't:

Use marketing language
Be vague or generic
Focus only on business outcomes
Omit experimentation details
Exaggerate advancement

Calculating Expenditures

Eligible categories:

1. Salaries and Wages

Identify SR&ED personnel
Determine time allocation per employee
Calculate: Salary × SR&ED %
Include employer CPP, EI contributions

2. Materials Consumed

Total materials used in SR&ED
Exclude materials in products sold
Only consumed or transformed materials

3. Contractor Payments

80% of arm's-length contractor costs
Must be for SR&ED work specifically

4. Overhead

Proxy method (recommended): 65% of eligible salaries
Traditional method: Actual overhead with allocation

5. Capital Equipment (if applicable)

Equipment used >90% for SR&ED
First $1.3M can be current expense

Learn how to calculate SR&ED credits →

Step 4: Filing Your Claim

Filing Requirements

Submit:

Form T661 (SR&ED Expenditures Claim)
Schedule T2SCH31 (Investment Tax Credit)
T2 Corporate Income Tax Return

Method:

Electronic filing via EFILE (recommended)
Paper filing by mail (slower processing)

Deadline

18 months after fiscal year-end

Examples:

Dec 31, 2023 year-end → File by June 30, 2025
March 31, 2024 year-end → File by September 30, 2025

Warning: There is no extension. Miss the deadline and you cannot claim for that year.

Pre-Claim Consultation (Optional)

CRA offers a voluntary Pre-Claim Consultation service where you can discuss eligibility before filing. Benefits:

Educational feedback from CRA
May reduce post-filing review
Free service
Non-binding (they can still review later)

When useful: First-time claimants, uncertain eligibility, new types of projects

Filing Checklist

All projects described on T661
Expenditure calculations complete
Proxy vs. traditional method chosen for overhead
T2SCH31 completed for ITC claim
Provincial credits filed (if applicable)
Backup documentation organized (don't submit, but ready)
Internal review completed
Filed before deadline

Step 5: CRA Review Process

What to Expect

After filing, CRA may:

Accept claim as filed (common for straightforward claims)
Request additional information (letter or phone call)
Conduct financial review
Conduct technical review
Schedule site visit (for larger/complex claims)

Financial Review

CRA verifies:

Expenditure calculations are correct
Costs are properly categorized
Supporting receipts/records exist
Allocation methodologies are reasonable

Common requests:

Detailed time allocation support
Material consumption records
Contractor agreements

Technical Review

CRA assesses:

Does work meet SR&ED definition?
Was there technological uncertainty?
Was systematic investigation used?
Was advancement achieved?

Review may include:

Written questions
Phone interviews with technical staff
Site visit to facility

Responding to CRA

Best practices:

Respond promptly (within requested timeframe)
Answer specifically what was asked
Provide supporting documentation
Don't over-volunteer information
Be honest and consistent

If site visit occurs:

Prepare key personnel
Organize documentation
Be factual and helpful
Follow up in writing

Timeline

Standard claims: 4-6 months after filing With review: 8-14 months Complex/large claims: 12-18 months

Step 6: Assessment and Refund

Notice of Assessment (NOA)

After CRA completes review, you receive a Notice of Assessment showing:

Claimed amounts
Allowed amounts
Any adjustments
Final credit calculation

If Claim Accepted

For CCPCs with refundable credits:

Refund processed within 30 days of NOA
Direct deposit or cheque
Provincial credits processed separately

For non-refundable credits:

Applied to reduce taxes owing
Can carry back 3 years or forward 20 years

If Claim Reduced or Denied

Options:

Accept adjustment - No further action
Request clarification - Understand why
File objection - Formal appeal process (90 days to file)
Appeal to Tax Court - If objection unsuccessful

When to object:

CRA misunderstood your project
Technical work was eligible
Documentation was adequate
Significant amount at stake

Provincial Credits

Ontario, Quebec, and other provincial credits:

Separate from federal SR&ED
Filed with provincial tax return
Different assessment timeline
Processed by provincial authority

Special Situations

First-Time Claimants

Expect:

Higher likelihood of review
Educational feedback from CRA
Foundation being established for future claims

Recommendations:

Consider pre-claim consultation
Be thorough in documentation
Consider professional help
Use conservative approach if uncertain

Retroactive Claims

You can claim prior years:

Amend returns up to 3 years back
Must have documentation from that period
More challenging to support after time passes

Process:

File T1ADJ or letter to amend prior year
Include original T661 forms for each year

Multi-Year Projects

For ongoing R&D projects:

Claim annually for work completed that year
Document clearly by fiscal period
Show progression and continued uncertainty
Each year should show advancement

Startups Without Revenue

Good news: SR&ED works for you!

Refundable credits paid as cash
No taxable income required
Critical early-stage funding

Considerations:

Focus on documentation from the start
Professional help often valuable
May be reviewed as first-time claimant

Working with Professionals

When to Get Help

Consider an SR&ED consultant if:

First-time claiming
Claim exceeds $100,000
Multiple complex projects
Limited internal expertise
Prior claim denied or reduced
Want to maximize value

What Consultants Do

Technical support:

Project identification
Technical narrative writing
Form T661 completion

Financial support:

Expenditure calculations
Allocation methodologies
Provincial credit optimization

Process support:

CRA communication
Review/audit defense
Objections if needed

Find Professional Help with SR&ED Services

The claims process is complex, and working with experienced professionals can significantly improve your outcome:

See our detailed guide on How to Choose an SR&ED Consultant →

Professional Services by Claim Stage

Project Identification & Documentation:

Project Identification Services - Discover eligible work you might have missed
Technical Documentation Services - Build compelling technical narratives

Claim Preparation:

Claim Preparation Services - End-to-end claim filing and optimization
Financial Analysis Services - Accurate expenditure calculations

If You're Under Review or Need Defense:

CRA Audit Support - Navigate CRA questions and site visits
Compliance Review Services - Ensure your claim is defensible

Find SR&ED Consultants →

Frequently Asked Questions

How long does the whole process take?

From year-end to refund: typically 6-18 months depending on claim complexity and whether CRA reviews.

Can I file after the 18-month deadline?

No. The deadline is absolute—you cannot claim SR&ED for a year if you miss the 18-month filing window.

Do I need to claim every year?

No, but consistent claiming is advisable. It builds documentation practices and demonstrates ongoing R&D investment.

What if my claim is denied?

You have the right to object within 90 days. Many objections successfully recover denied amounts, especially with professional help.

Can I claim for work done by contractors?

Yes, 80% of arm's-length contractor payments for SR&ED work are eligible.

How much does a consultant cost?

Typically 15-25% of credit value (contingency) or $5,000-$25,000 flat fee depending on claim complexity.

Next Steps

Ready to start your SR&ED claim?

Review this quarter's projects for SR&ED eligibility
Assess your documentation against requirements
Estimate potential claim value to determine approach
Decide on DIY vs. professional help
Begin preparation at least 4 months before filing deadline

Find an SR&ED Consultant →

Last updated: November 2024. Process details may vary. Consult with a qualified SR&ED professional for your specific situation.