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What expenses qualify?

The subject of qualifying expenses can be quite nuanced but here are the basics. You can claim expenses that were expended to perform experimentation, including wages, contractors and materials. Staff and contractors must be in Canada, materials can come from outside Canada. If an employee spends half a year experimenting on the SR&ED project, you can claim half their wages.  If a contractor was hired to build a prototype, you can claim that too. If materials were transformed or consumed in the experiment, you can claim the materials.

You can claim support activities including the following

  • Engineering
  • Design
  • Operations research
  • Mathematical analysis
  • Computer programming
  • Data collection
  • Testing or psychological research

This has to be directly related to the SR&ED work itself, so it is vital that support work is properly understood and applied. It isn’t hard to get confused about such items as data collection, which cannot be claimed if it is routine work.

There are certain activities, such as contracting out welding and electrical work that may be claimed, but it is nuanced and generally cannot be claimed as part of the proxy method.