If you are reading this, a well-trained SR&ED consulting firm can tell right from the title that a business project does not qualify for the SR&ED Tax Credit. Many companies ask what the difference is or if there is any difference between a business project and an SR&ED project. The easy answer is yes there is a definite difference, but let’s dig into this further.

I think the place to start is to be clear about what the SR&ED tax credit is supposed to encourage.

The scientific research and experimental development tax credit are intended to stimulate advancements in a field of science or technology. The hope is that the advances will help innovation occur and thereby strengthen the Canadian economy.

Another way to look at it is to ask, “Do all business projects or technology projects strengthen the Canadian economy?” Certainly, some business projects and technology projects generate profit for businesses, but they are not necessarily innovative or built using new scientific or technological knowledge. So, an SR&ED claim that describes a business project or technology project fails to achieve the objective of the SR&ED tax credit program, to advance knowledge.

The SR&ED claim needs to show knowledge was developed and that it was developed with some proof that demonstrated the validity and accuracy of the knowledge. It might be tempting to think of someone with a white lab coat carrying out experiments testing a hypothesis, but the truth is many of us do this as part of our natural or usual process of working. Because of this, money is often left on the table since the claim amount doesn’t include all of the eligible activity.