SR&ED Qualifying Criteria

The CRA’s determination of whether or not the work conducted is considered experimental development is contingent on two preconditions.

The “Why” requirement:

The work that is being conducted must be either for the advancement of scientific knowledge or for the purpose of achieving technological advancement. In other words, the work must generate or discover knowledge that advances the understanding of either science or technology.

Success is generally predictable. However, the outcome of a newly obtained scientific or technological knowledge can be incalculable at times. The lack of publicly available scientific or technological knowledge may result in unforeseeable and unavoidable setbacks. These interruptions are referred to as “scientific or technological uncertainty.” If newly generated knowledge is utilised to overcome these setbacks, then the work will have satisfied the “Why” requirement of the CRA, regardless of its success.

The “How” requirement:

When an attempt is made to resolve a scientific or technological uncertainty, the work must both define the problem and advance a hypothesis towards that problem. This can be achieved through the generation of factual propositions, testing ideas using experimentation and analysis, and developing logical deductions based on said results. If the work is conducted in a way that reflects the CRA’s definition of systematic investigation or search, and incorporates evidence of such ventures, then the work will have satisfied the “How” requirement of the CRA.

01 – Technological uncertainty

Definition: Whether a given result or objective can be achieved or how to achieve it, is not known or determined based on generally available scientific or technological knowledge or experience. 

This portion of the guide is exciting for us SR&ED enthusiasts, as this is where SR&ED begins. If the team’s project goals could not be achieved due to concurrent technological limitations which prevent the development of new or improved capacity from being developed, then there is an obstacle which cannot be circumvented by utilising a standard approach.

02 – Systematic investigation

Definition: An approach that defines problem, while advancing a hypothesis towards resolving the problem. This includes planning and testing the hypothesis through experimentation or analysis, and developing logical conclusions based on the results.

This means the team’s SR&ED project must have a documented iterative scientific process to resolve the identified technological uncertainty. If you conduct several alterations to improve capacity, but do not document the necessary evidence, then that work will have been wasted from an SR&ED perspective. Documenting the journey from conception to a market-ready product (and beyond) is key to a fully realised SR&ED claim.

03 – Technological Advancement

Definition: the origination of information or the discovery of knowledge that advances the understanding of technology.

If the team’s SR&ED project goals could not be delivered due to unforeseeable or technological limitations, then this venture can be summarized as knowledge gained as a result of the work conducted. In other words, the success of the project affects the SR&ED claim, as even an unsuccessful project produces knowledge, such as what works and doesn’t work.

These three criteria is what makes up the technical report that needs to be prepared for the SR&ED filing.