Modernizing SR&ED to support Canada’s ‘Scale-Up’ Companies

If you don’t work in Canadian tech, you might not realize how important the Scientific Research and Experimental Development tax credit is.

It doesn’t lend itself to big funding announcements or flashy campaign promises like some economic development programs, but SR&ED is a tax incentive worth close to $4 billion annually, and it encourages a huge number of companies to engage in research and development.

Incredibly, SR&ED dates all the way back to 1944, and through the decades, it has been a bedrock public policy tool for encouraging private sector innovation. The overwhelming majority of CCI member companies use SR&ED, but it remains a deeply frustrating system that can be confusing, arbitrary, and difficult to navigate.

For years, CCI has been advocating for changes to streamline and modernize SR&ED, which is why we were thrilled to see the federal government announce a formal review last spring.

After consulting with our members — Canadian-headquartered scale-up technology companies — CCI has developed a detailed and comprehensive roadmap for SR&ED modernization.

Read CCI’s full policy brief here.‍

In particular, we’d like to highlight the six key recommendations:

1. Broaden the definition of eligible expenditures to include the preparation and examination phase of protecting intangible assets
2. Ensure that SR&ED explicitly covers commercialization and continuous improvement activities
3. Develop the education tools and resources to support auditors that work with data-intensive and advanced technology companies
4. Restructure and modernize expenditure thresholds for SR&ED claims
5. Develop new evaluation metrics to ensure SR&ED dollars benefit Canada’s innovation economy
6. Simplify application process & streamline funding disbursement

Taken together, these measures would give companies more certainty, which would in turn lead to more investment in R&D and commercialization efforts.

It’d be a win-win for Canadian innovators and for Canada.

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If you’d like to discuss these proposals in more depth, contact Nick Schiavo , CCI’s Director of Federal Affairs, and Abu Kamat , CCI’s Manager of Policy.