Technological Advancement: What Is Good Enough For SR&ED?

Technological Advancement

Although it’s located right at the heart of SR&ED is Technological Advancement, many people aren’t sure what counts. Luckily, the Canadian Revenue Agency (CRA) gives us a clear definition and criteria on the subject.

Let’s start right at the top.

Technological Advancement Defined

As defined by the CRA: “scientific or technological advancement is the generation or discovery of knowledge that advances the understanding of science or technology.”

Sounds clear enough, but there is one very important distinction to make here: advancement must not come through accidental discovery through trial and error. You can’t just throw darts at a board until something hits. More specifically, the CRA defines trial and error as “executing a series of tests in no particular order and not part of a systematic plan.”

Some examples that a technological advancement might be needed include:

  • Existing design methods are not applicable
  • Requirements or specifications do not conform to existing standards
  • Too many variables or unknowns
  • Parameters or conditions are outside the normal operating range
  • Nature of the problem is evolving
  • Data is not readily available
  • There are interlocking constraints

There are also a few examples of what does NOT meet the requirements of attempting to achieve technological advancement. If your acquired knowledge through:

  • Training
  • On-the-job learning
  • Hiring expert employees
  • Hiring consultants
  • Purchasing proprietary knowledge

Check Out Another Blog: SR&ED Eligible Expenditures: What Can You Claim?

Avoiding Trial And Error

Form hypothesis

Taking a systematic approach to your Scientific Research and Experimental Development is essential, but not difficult.

According to the CRA this means: “Generating an idea consistent with known facts, which serves as a starting point for further investigation towards achieving your objective or resolving your problem. Your idea may be expressed as a possible solution to a problem, a proposed method or an approach.”

Testing

With a direction in mind, you can now test your hypothesis through experimentation or analysis. It’s important to note that the hypothesis can change and evolve as a result of testing.

Conclusions

After testing is complete, you can now form logical conclusions based on the results of the previous stage.

Evidence

It is crucial that throughout every stage, you are keeping evidence and notes that are generated as the work progresses.

Success Isn’t A Requirement

Here’s some good news: the success or failure to meet your objectives are not relevant when assessing whether your work meets SR&ED requirements! Since the definition states that only the ‘purpose’ of the work must be for achieving scientific or technological advancement, the end result has no bearing on your claim.

This means you can experiment without fear that falling short of your objectives means you would have to eat the entire cost of the work.

If you would like to know more about SR&ED, what work is eligible, or just about anything else, you can check out our other blogs, or just give us a call.

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