Filing an SR&ED claim for the first time is daunting. The CRA forms are dense, the eligibility language is technical, and the stakes feel high. The good news: the process is far more manageable than it looks. Most first-time claimants are surprised by how straightforward it becomes once broken into clear steps.

This guide walks through the entire process from identifying eligible work through to receiving your refund.

Disclaimer: This guide is for informational purposes only and does not constitute tax or accounting advice. SR&ED claims involve significant complexity. Work with a qualified tax professional or SR&ED consultant before filing.

Step-by-Step: Filing Your First SR&ED Claim

1

Identify Eligible Projects

Start by reviewing your technical work from the tax year. Look for projects where:

  • You faced a genuine technical problem with no obvious solution
  • Standard techniques or existing knowledge were insufficient
  • You experimented, tested, or iterated to find an answer
  • The work was aimed at advancing technical knowledge or capability

Common examples: custom software with novel algorithms, manufacturing process improvements, new product formulation, agricultural experimentation. Not every project qualifies — focus on work where uncertainty drove experimentation.

2

Gather Your Documentation

CRA expects contemporaneous records — documents created during the work, not reconstructed afterward. Collect:

  • Project specifications, design docs, or technical problem statements
  • Meeting notes, email threads, Slack conversations about technical challenges
  • Test results, experiment logs, prototype photos
  • Employee timesheets or time-tracking exports showing SR&ED work
  • Contractor invoices and agreements
  • Git commit history, bug tickets, sprint notes (for software projects)
3

Calculate Eligible Expenditures

For each SR&ED project, tally the eligible costs incurred during the tax year:

  • Employee wages: Salary portions attributable to SR&ED work (based on time allocation)
  • Contractor fees: 80% of arm's-length payments for SR&ED work
  • Materials: Items consumed or transformed during experimentation
  • Overhead (proxy method): 55% of eligible wages (simplest approach for most businesses)

Your accountant will use these figures to populate Schedule 31 and calculate your investment tax credit (ITC).

4

Write the T661 Project Descriptions

The T661 is CRA's project information form. For each SR&ED project, you'll write a narrative answering three questions:

  • What was the scientific or technological uncertainty? Be specific. What wasn't known at the start of the project?
  • What work was done through systematic investigation? Describe the experiments, tests, and iterations.
  • What technological advancement resulted? What new knowledge or capability did the work produce?

These narratives are CRA's primary basis for evaluating your claim. Clear, specific, technical writing is essential. Vague descriptions like "we developed innovative software" are a red flag.

5

Complete Schedule 31 (Investment Tax Credit)

Schedule 31 is attached to your corporate T2 return. It calculates your SR&ED ITC based on:

  • Your qualified SR&ED expenditures (from step 3)
  • Your company type and taxable capital (determines the credit rate: 15% or 35%)
  • Any prior-year unclaimed ITCs being carried forward

For a CCPC with taxable capital under $10 million, the refundable ITC is 35% of eligible expenditures up to $3 million. The ITC is applied against your tax owing first; any remainder is refunded in cash.

6

File Your T2 Return with the SR&ED Claim

Your T661 and Schedule 31 are filed together with your annual T2 corporate tax return. Make sure:

  • All forms are filed within 18 months of fiscal year-end (hard deadline — no exceptions)
  • The T661 includes all required project information for each SR&ED project
  • Schedule 31 accurately reflects total qualified expenditures and ITC calculation
  • Supporting documentation is organized and retained (not filed with CRA, but available if requested)
7

Respond to Any CRA Review

CRA processes most SR&ED claims within 120 days. A portion of claims — particularly first-time claims or claims with complex technical work — are selected for technical or financial review.

  • Financial reviews verify your expenditure calculations and time allocations
  • Technical reviews assess whether your work meets the three SR&ED criteria

If your claim is reviewed, CRA will contact you to schedule a site visit or request documentation. Respond promptly and provide all requested records. Having strong contemporaneous documentation (Step 2) is critical here.

Common First-Time Filer Mistakes

First-time claimants tend to make the same set of errors. Avoid these:

  • Vague technical narratives. "We developed a machine learning model" doesn't tell CRA what was uncertain. Explain specifically what was unknown and why existing approaches failed.
  • Missing the 18-month deadline. Set a calendar reminder the day your fiscal year closes. The deadline is absolute.
  • Over-allocating time. CRA expects realistic time estimates. If you claim 80% of your entire dev team's time for SR&ED, expect scrutiny. Only claim time directly attributable to eligible work.
  • Including routine development. Standard software development, bug fixes, and maintenance don't qualify. Focus on work where genuine technical uncertainty existed.
  • Not retaining documentation. CRA can audit claims up to 3 years after the initial assessment. Retain all supporting records.
  • Mixing in commercial production work. Costs incurred during commercial production of a new product or process are not eligible. The line between development and production must be clear.

Do You Need an SR&ED Consultant?

Many first-time claimants work with an SR&ED consultant, particularly for claims over $50,000. Consultants typically charge on a contingency basis (10%–25% of recovered credits) or a fixed fee. The value is highest for:

  • Complex technical projects that require expert articulation of the SR&ED narrative
  • Companies facing their first technical review from CRA
  • Multi-project claims with significant wage allocations

For smaller claims, your regular accountant may be sufficient if they have SR&ED experience. IncentivIQ's narrative generator tool can help first-time filers draft the technical project descriptions required for the T661.

Timeline Expectations

What to Expect After Filing
  • CRA target: 60 days for refundable claims (often faster in practice)
  • CRA target: 120 days for all other claims
  • Technical or financial reviews add 60–120 days
  • Refunds are issued by direct deposit or cheque once assessment is complete

Once you've successfully navigated your first SR&ED claim, subsequent years become significantly more efficient. The documentation habits, expenditure tracking, and project description process are largely the same each year.

For a deeper look at eligibility criteria and credit rates, read our complete guide: SR&ED Tax Credit Eligibility 2026.

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