Income Tax Act s. 248(1): Definition of SR&ED

This is the statutory definition on which every SR&ED claim stands or falls. Paragraphs (a) to (c) set out the three categories of eligible work: basic research, applied research and experimental development. Paragraph (d) extends eligibility to eight kinds of support work, and paragraphs (e) to (k) list the activities that are expressly excluded. When CRA questions whether a project is SR&ED, the dispute is almost always about how the work fits this definition.

Text of the Provision

248(1) “scientific research and experimental development” means systematic investigation or search that is carried out in a field of science or technology by means of experiment or analysis and that is

(a) basic research, namely, work undertaken for the advancement of scientific knowledge without a specific practical application in view,

(b) applied research, namely, work undertaken for the advancement of scientific knowledge with a specific practical application in view, or

(c) experimental development, namely, work undertaken for the purpose of achieving technological advancement for the purpose of creating new, or improving existing, materials, devices, products or processes, including incremental improvements thereto,

and, in applying this definition in respect of a taxpayer, includes

(d) work undertaken by or on behalf of the taxpayer with respect to engineering, design, operations research, mathematical analysis, computer programming, data collection, testing or psychological research, where the work is commensurate with the needs, and directly in support, of work described in paragraph (a), (b), or (c) that is undertaken in Canada by or on behalf of the taxpayer,

but does not include work with respect to

(e) market research or sales promotion,

(f) quality control or routine testing of materials, devices, products or processes,

(g) research in the social sciences or the humanities,

(h) prospecting, exploring or drilling for, or producing, minerals, petroleum or natural gas,

(i) the commercial production of a new or improved material, device or product or the commercial use of a new or improved process,

(j) style changes, or

(k) routine data collection;

Source: Income Tax Act (Canada), subsection 248(1), as consolidated May 14, 2010. Archived excerpt; subsequent amendments are not reflected. For the current text see the Income Tax Act at Justice Laws.