How to Apply for SR&ED: The Claim Process Step by Step

SR&ED claims are filed via the CRA's T661 form, attached to your corporate tax return. The process requires technical narratives, financial schedules, and project-level documentation that most companies aren't prepared to produce at filing time.

Here is the full sequence.

Step 1: Identify Qualifying Projects

Go back through the year. Look for: - Projects where engineers debated the "right" approach without a clear answer - Builds that required multiple failed attempts before working - Features that required novel solutions not available in any library or framework - Performance or scaling challenges that required architectural experimentation

For each project, ask: "Was the outcome technically uncertain before we started?"

Step 2: Build Your Project Descriptions

Each project description must answer: - What scientific or technological uncertainties did you face? - What work did you perform to overcome those uncertainties? - What scientific or technological advancements did you achieve?

The language matters. "We built a recommendation engine" is not SR&ED language. "We investigated whether transformer-based embeddings could reduce cold-start latency below 200ms in sparse user datasets" is SR&ED language.

Step 3: Calculate Eligible Expenditures

Qualifying expenditures fall into four categories:

Salaries and Wages — The largest category for most companies. Only the SR&ED portion of each employee's time counts.

Contractor Costs — 80% of arm's-length contractor fees for SR&ED work qualify.

Materials — Raw materials consumed or transformed during experimental work.

Overhead (Proxy Method) — 55% of eligible salaries is automatically added as overhead. Most companies use this.

Step 4: Complete Form T661

The T661 contains project descriptions, financial calculations, and the investment tax credit computation. For CCPCs, your ITC rate is 35% on up to $6M of qualifying expenditures (tax years beginning on or after December 16, 2024), and 15% above that.

Step 5: Attach to Your T2 Corporate Return

The claim is due 12 months after the T2 filing-due date for the tax year in which the expenditures were incurred; for most corporations that is 18 months after the end of that tax year. For example, for a fiscal year ending December 31, 2025, the claim is due by June 30, 2027. A late claim for that year is not accepted.

Step 6: Prepare for a Potential Review

A CRA reviewer will check: - Does the work described match the uncertainties claimed? - Is there contemporaneous documentation (tickets, commit history, lab notes)? - Are the financial calculations consistent with actual payroll records?

The single best defense: time-stamped records created during the project.

Who should prepare the claim?

Companies prepare SR&ED claims in-house, with their accountant, or with a specialist firm. Fee models differ: some firms charge a percentage of the credit, others a fixed fee. Compare on the written scope, the named person responsible, and the published fee. Form T661 discloses the claim preparer and the billing arrangement, as the CRA requires.