CadenceTax & Accounting
Get started

Updates

SR&ED after Bill C-15: who newly qualifies, and for how much

Bill C-15 didn't change who qualifies for SR&ED. It doubled the ceiling on spending that earns the 35% credit to $6 million and made equipment claimable again.

By Matthew Reeves, FounderAugust 23, 2026 · 8 min read

Summary

SR&ED stands for Scientific Research and Experimental Development, and it’s the federal government’s main tax support for research work. SR&ED comes in two parts: a deduction that reduces your corporation’s taxable income, and an investment tax credit that reduces the tax you owe. For most owner-managed companies that credit is paid out in cash, even in a year when the corporation owes no tax. Bill C-15, the first bill implementing the federal government’s Budget 2025, became law on March 26, 2026, and three of its changes matter to an incorporated owner.1

  1. C-15 didn’t touch the test for whether your work counts as research at all, which the Canada Revenue Agency (CRA) sets out itself in its guidance on eligible work. Work that failed that eligibility test in 2024 doesn’t qualify merely because the credit has become more generous.2
  2. Equipment bought to do research with earns the credit again, for the first time since the end of 2013, if you acquired it on or after December 16, 2024. The purchase date matters here rather than your corporation’s year end, and further conditions apply, covered below.
  3. The annual ceiling on spending that earns the top credit rate, which is 35 cents back for every dollar of eligible spending, doubled from $3 million a year to $6 million. A size test that shrinks that ceiling for larger companies moved up too. The range over which that test applies ran from $10 million to $50 million of company size, and now runs from $15 million to $75 million, where size means taxable capital, a defined measure explained below.

We’d usually tell an owner to check the equipment point and add up the balance-sheet size of the whole corporate group once (e.g. your operating company plus a holding company the same people control). After that, stop thinking about the $15 million and $75 million cut-offs. That advice flips if the group’s total lands between $10 million and $75 million, inside either the old range or the new one. In that range, C-15 can take your ceiling from near zero up to the full $6 million.

What the credit is worth in cash

The enhanced credit is worth 35% of qualifying research spending by a Canadian-controlled private corporation. Eligible Canadian public corporations can also qualify, while the basic rate is 15%.3 A Canadian-controlled private corporation is a private company resident in Canada, not controlled by non-residents or by a public company. Nearly every owner-managed business in the country fits that description. The 35% rate stops at an annual ceiling called the expenditure limit, and eligible spending above the ceiling earns 15%.4 For tax years beginning on or after December 16, 2024, the ceiling is $6 million of research spending a year, up from $3 million.5

Up to the ceiling, the 35% credit on your day-to-day research costs is paid to you in cash in full, even if your corporation owes no tax at all. Day-to-day costs means money spent running the work rather than buying assets (e.g. salaries, materials and equipment lease costs), so a dollar of qualifying salary returns 35 cents in cash. Work contracted out to an independent supplier counts too, but only 80% of what you pay goes into the claim. Buying equipment works differently: only 40% of the credit earned on it is paid out in cash, and the rest can only cancel tax you owe.6 So a dollar spent on a new research machine returns 14 cents of cash and 21 cents of credit with value only against tax. If you have no tax for it to cancel this year, that 21 cents isn’t lost, because unused credit carries back 3 tax years or forward 20.7

Only salary for research work done in Canada goes into a claim, with a narrow exception for a Canadian-resident employee working abroad in support of the Canadian project.8 Dividends you pay yourself reach no claim at all.

Taxable capital, and why the group matters

The $6 million ceiling isn’t handed to every private company, and it shrinks as your taxable capital employed in Canada rises. Taxable capital measures the size of your balance sheet rather than your profit or your sales. Profits you left in the company, and money you have lent the company, both count toward it. Shares you hold in another corporation do not.9 Your accountant reports the taxable capital figure on Schedule 33 of your corporate return, so ask for last year’s number rather than estimating it.

For those same tax years, the ceiling starts falling once the previous year’s taxable capital passes $15 million, and it reaches zero at $75 million. The older range ran from $10 million to $50 million.10 In between, the ceiling falls in a straight line: every extra dollar of taxable capital takes 10 cents off the $6 million ceiling. Spending above the ceiling still earns the basic 15% credit. Where your eligible spending stays above that ceiling, each extra dollar of taxable capital therefore costs 2 cents of total credit: 10 cents of spending moves from 35% to 15%. The effect on your cash refund can differ, because refundability has separate conditions.11

Below $10 million the size test doesn’t reach you, because you had the whole of the old $3 million ceiling and you have the whole of the new $6 million one. Between $10 million and $15 million the old ceiling had already started shrinking and the new one hasn’t, so the change reaches you there too. Between $50 million and $75 million a company newly qualifies for the 35% rate, though not for SR&ED itself, because its old ceiling had already shrunk to zero.

Run the taxable capital test on your whole corporate group, not on the company doing the work alone. Where your corporation is associated with another one, broadly where the same person or family controls both, the taxable capital of every company in the group is added together. The group also gets one $6 million ceiling between them rather than one each. Until the group files an agreement on Schedule 49 dividing that ceiling up, every company’s limit is zero.12 Association is a legal test with a lot of detail in it, so have it checked rather than guessed.

Equipment, and the two effective dates

From the end of 2013 until December 2024, buying equipment to do research with earned nothing under SR&ED. C-15 brought equipment spending back into both parts of the program: it reduces your taxable income and it earns the credit. The rule covers depreciable property acquired on or after December 16, 2024 and installed and ready to use for the first time after that date. A machine bought in December 2024 but commissioned in March 2025 is therefore tested on the later date.13 Depreciable property means a machine or similar asset written off over several years. Land never counts, and a building counts only if it meets a narrow published cleanroom specification.

The first of three further limits is that the machine must be intended for all or substantially all research use, which the CRA reads as 90% or more of its operating time.14 The test runs on your intention when you bought it, so a prototyping machine that also runs production is unlikely to clear it. Equipment used mainly but not almost exclusively for research can still earn a partial credit as shared-use equipment, which is worth asking about. Second, a used machine gets the deduction against your income but earns no credit at all, so the 14 cents and 21 cents above are the arithmetic for new equipment only.15 Third, you can’t claim the same asset twice, once as research spending and once as capital cost allowance (i.e. the tax version of depreciation). Sell it later or switch it to ordinary production, and you repay some or all of the credit.13

The two effective dates in Bill C-15 do not work the same way. The higher ceiling and the wider size range apply to tax years beginning on or after December 16, 2024. A corporation with a June 30 year end was therefore still on the old rules for the year that started July 1, 2024. Equipment runs off the acquisition date instead, so that same company can still claim a machine it bought in February 2025.16

The filing deadline

The reporting deadline is the most unforgiving rule in the program. A claim goes on Form T661 and is due 12 months after the day your corporate return is due. Your corporate return is itself due six months after your year end, so the claim lands 18 months after year end (e.g. June 30, 2027 for a December 31, 2025 year end). Once that day passes, the CRA won’t accept the information, and both the deduction and the credit are lost.17

How often this changes

The eligibility test for research work has been stable for years and we wouldn’t expect it to move. The money around it has just moved a great deal, though, and the CRA was still rewriting its own SR&ED policy pages through the spring of 2026. Once a year ahead of your year end is usually enough.

Re-check sooner when your tax year’s start date first falls on or after December 16, 2024, when the group’s prior-year taxable capital crosses $10 million, $15 million or $75 million, or when you buy another corporation or set up a holding company. Re-check when you take a grant or a provincial research credit, each of which cuts the spending your federal credit is calculated on.18 Re-check urgently if control passes to non-residents, which ends the 35% rate, or to a public company, which ends it unless the buyer is itself an eligible Canadian public corporation.3

Closing thoughts

Most of the coverage of Bill C-15 has been about the size of the numbers, and the numbers did get bigger. Research credits have never been much of a reason to do research, though. They change what a year of development costs you after tax, and not much else. The question worth answering before any of the arithmetic is whether you’d still be building the thing if the credit didn’t exist.

How we handle it

We don’t prepare SR&ED claims, and we refer that work out to a specialist. Where a client’s work looks like it might qualify, we flag it early and work alongside the specialist. Our side of the file is the T2, your corporation’s income tax return, along with the pool of research spending you haven’t deducted yet and any credit you haven’t used yet.

Footnotes

  1. Department of Finance Canada, “Legislation passes to implement Budget 2025: Canada Strong”, March 26, 2026, confirmed by the CRA, “SR&ED news and updates”. The statute enacting these changes is the Budget 2025 Implementation Act, No. 1, being S.C. 2026, c. 3, which received royal assent on March 26, 2026 and carries the application provisions cited below. A fourth SR&ED change opened the 35% rate to eligible Canadian public corporations under Income Tax Act section 127(10.1). The change is not covered here, because it does not reach a private owner-managed company. Commentary published between December 2024 and Budget 2025 often states a $4.5 million ceiling. The 2024 Fall Economic Statement proposed that figure (Department of Finance Canada backgrounder, December 13, 2024), and Budget 2025 raised it to $6 million. Verified 2026-08-23. ↩

  2. CRA, “What work is eligible” (SR&ED Tax Incentive Program), which sets out the two-part test, the requirement that the work be conducted in Canada, and the list of excluded work. Verified 2026-08-23. ↩

  3. Income Tax Act section 127(10.1) grants the 20% addition to a Canadian-controlled private corporation or an eligible Canadian public corporation, the latter defined at section 127(9). Paragraph (b) of that definition covers an eligible subsidiary. An eligible subsidiary is a corporation resident in Canada, at least 90% of the issued shares of each class of which are held directly or indirectly by one or more eligible Canadian public corporations. Control passing to non-residents ends access to the 35% rate, while control passing to a public company does so only where the buyer falls outside that definition. Verified 2026-08-23. ↩ ↩2

  4. CRA, “Get an investment tax credit (ITC)”: the basic rate is 15% of qualified SR&ED expenditures. Most Canadian-controlled private corporations earn the enhanced 35% rate up to the expenditure limit, built as the basic 15% plus a 20% addition made by Income Tax Act section 127(10.1). Verified 2026-08-23. ↩

  5. CRA, “Get an investment tax credit (ITC)”: an expenditure limit of $6 million for tax years beginning after December 15, 2024, and $3 million for tax years beginning before December 16, 2024. The statutory formula is at Income Tax Act section 127(10.2). Verified 2026-08-23. ↩

  6. CRA, “Get an investment tax credit (ITC)”: up to the expenditure limit, the credit earned at the 35% enhanced rate on current expenditures is 100% refundable. The credit earned on capital expenditures is 40% refundable, both figures resting on Income Tax Act sections 127.1(2)(f) and 127.1(2.01). The 80% for contracted-out work is the other side of the 20% reduction the CRA applies to arm’s-length contract expenditures and third-party payments (CRA, “Calculate qualified expenditures”). A 180-day payment rule and separate treatment for non-arm’s-length contracts also apply and are not covered here. Verified 2026-08-23. ↩

  7. The 14 cents and 21 cents are the 40% refundable and 60% non-refundable shares of a 35-cent credit, arithmetic on the two published figures rather than amounts stated by any issuer. Unused credit may be carried back up to 3 tax years or carried forward up to 20. See CRA, “Get an investment tax credit (ITC)”, reading Income Tax Act section 127(9) with the transitional rule in section 127(9.01). A refunded credit is not free of tax either, because Income Tax Act sections 127.1(3), 37(1)(e) and 12(1)(v) either reduce the following year’s research deduction pool or bring the excess into income. Verified 2026-08-23. ↩

  8. CRA, “Calculate allowable expenditures”: allowable current expenditures include salary or wages for SR&ED performed in Canada, alongside materials, contract payments and equipment lease costs. The same page carries the criteria for claiming work outside Canada, which rest on Income Tax Act sections 37(1.4) and 37(1.5). Salary paid to a Canadian-resident employee for SR&ED carried on outside Canada is deemed to be an in-Canada expenditure. The corporation must directly undertake that work solely in support of SR&ED carried on in Canada. The deemed amount is capped at a percentage of the corporation’s in-Canada SR&ED salary total, and that percentage is not stated here for the reason the reviewFlags record. Two further restrictions apply to an owner holding 10% or more of any class of the corporation’s shares, under sections 37(9) and 37(9.1). “Specified employee” and “specified shareholder” are defined at section 248(1). A bonus or profit-based pay is excluded from the claim outright, and claimable salary is capped at five times the year’s maximum pensionable earnings under the Canada Pension Plan. A separate and tighter restriction applies to the salary base used in the overhead proxy calculation. Verified 2026-08-23. ↩

  9. Income Tax Act section 181.2, taxable capital employed in Canada, consolidated statute current to 2026-06-21. Retained earnings sit in paragraph 181.2(3)(a) and loans and advances to the corporation in paragraph 181.2(3)(c). The investment allowance in paragraph 181.2(4)(a) is what takes shares of other corporations back out of the total, and it does not extend to bank deposits or guaranteed investment certificates. Taxable capital is reported on Schedule 33 of the T2 return each year. Verified 2026-08-23. ↩

  10. CRA, “Get an investment tax credit (ITC)”: for a corporation whose tax year begins after December 15, 2024, the expenditure limit begins to decrease when prior-year taxable capital employed in Canada reaches $15 million. The limit becomes nil starting at $75 million. For a tax year beginning before December 16, 2024, the same range ran from $10 million to $50 million. A company between $10 million and $15 million had therefore already lost part of the old ceiling. Verified 2026-08-23. ↩

  11. Income Tax Act section 127(10.2): the limit is “$6 million x [($60 million - A) / $60 million]”, where A is nil if prior-year taxable capital is $15 million or less. Otherwise A is the lesser of $60 million and the excess over $15 million. The 10 cents per dollar is what that formula produces across the range. Where eligible spending exceeds the ceiling, the total ITC loss is 10 cents × (35% − 15%) = 2 cents per additional dollar of taxable capital, since spending above the limit earns the basic credit. Both amounts are arithmetic on the statutory formula and published credit rates. Verified 2026-09-25 against CRA, Get an investment tax credit, which distinguishes credit rates and refundability. ↩

  12. Income Tax Act section 127(10.2), description of A, subparagraph (ii), aggregates the taxable capital of associated corporations. Section 127(10.21) makes the expenditure limit of a corporation associated with one or more others nil except as otherwise provided. Section 127(10.3) restores it only where all of them file an allocation agreement, which the CRA takes on Schedule T2SCH49. Section 127(10.4) lets the Minister allocate the limit unilaterally where no agreement is filed within 30 days of written notice, and association itself is defined at section 256. Verified 2026-08-23. ↩

  13. CRA, SR&ED Capital Expenditures Policy: a depreciable property must be available for use for the first time after December 15, 2024 for its cost to enter the pool of deductible SR&ED expenditures. The statutory condition is acquisition on or after December 16, 2024. Income Tax Act section 127(11.2) governs the timing of the credit. An expenditure claimed for SR&ED must not also be included on Schedule 8, Capital Cost Allowance. Department of Finance Canada, Budget 2025 tax measures: capital expenditures are restored for both the deduction against income and the investment tax credit. CRA, “Get an investment tax credit (ITC)”: recapture applies to depreciable property acquired after December 15, 2024. The recaptured credit is added to tax payable in the year of sale or of conversion to commercial use. Buildings are excluded by section 37(8)(e)(i) other than a prescribed special-purpose building, and land by section 37(1)(b)(ii). A prescribed special-purpose building is defined by a cleanroom specification in Income Tax Regulations section 2903, added by section 109 of the Budget 2025 Implementation Act, No. 1. Verified 2026-08-23. ↩ ↩2

  14. CRA, SR&ED Capital Expenditures Policy, section 4.1: “all or substantially all” is accepted to mean 90% or more. The test runs on intended use at acquisition, even though subsequent use may be examined to evaluate that intent. The statutory test has a second limb the page does not describe, met where all or substantially all of the property’s value would be consumed by the research. The 90% reading is a CRA administrative position rather than a number written into the Income Tax Act. Verified 2026-08-23. ↩

  15. Income Tax Regulations paragraph 2902(b), replaced by section 108 of the Budget 2025 Implementation Act, No. 1 for property acquired on or after December 16, 2024, makes an expenditure on property previously used or acquired for use or lease by any person a prescribed expenditure. A prescribed expenditure earns no investment tax credit at all. CRA, “Calculate qualified expenditures”, lists the acquisition of used equipment among the prescribed expenditures that reduce qualified expenditures, and CRA, “Calculate allowable expenditures”, confirms used depreciable property still enters the deduction pool. The same regulation carves out shared-use equipment, which the CRA defines as depreciable property used primarily for SR&ED. The CRA lists it among the amounts that increase qualified expenditures for property acquired after December 15, 2024. Its two deemed amounts are not stated here. Verified 2026-08-23. ↩

  16. The application provisions sit in the Budget 2025 Implementation Act, No. 1, being S.C. 2026, c. 3, rather than in the consolidated statute. Sections 47(26) and 48(4) apply the expenditure limit, the taxable capital range and public-corporation access to tax years beginning after December 15, 2024. Sections 5(10), 47(23) and 48(5) apply the capital and lease measures by expenditure date instead. The CRA pages paraphrase them: CRA, “SR&ED news and updates”, and CRA, SR&ED Capital Expenditures Policy. Verified 2026-08-23. ↩

  17. CRA, SR&ED Filing Requirements Policy, sections 5.3 and 6.2: a corporation’s income tax return is due no later than 6 months after the tax year end. The SR&ED reporting deadline is 12 months after that, giving 18 months after the tax year end, under Income Tax Act sections 37(11) and 37(12). CRA, “After you claim”: once the reporting deadline has passed, the CRA will not accept any additional information, and the expenditures and related credit are lost. Neither source addresses whether any discretionary relief exists, and this page makes no claim about it. Verified 2026-08-23. ↩

  18. Most provinces and Yukon run their own research and development tax credits, calculated on the federal qualified SR&ED expenditures. The CRA states for each of them that the provincial credit reduces the expenditures you can claim federally. CRA, “Provincial and territorial research and development (R&D) tax credits”. Government assistance more broadly, including a grant, reduces qualified SR&ED expenditures under Income Tax Act section 127(18) and the definition of “qualified expenditure” at section 127(9). CRA, “Calculate qualified expenditures”, lists other types of government assistance among the reductions. No provincial rate or threshold is stated on this page, which is deliberate. Verified 2026-08-23. ↩

Questions your situation raises that this guide can't answer?

That's what the fit and fee estimate is for — describe your business, hear back within one business day.
Schedule a fit and fee estimate