Author:
Vijay Stevens, CPA
YALE PGC LLP / Senior Tax Manager
E: [email protected]
Edited by:
Integra International
Grant Gilmour, B.Sc., MBA, CA, CPA Canada, BC, CPA USA, Az, GDipICL.Sc.
INTEGRA TAX WORLD NEWSLETTER EDITOR
E: [email protected]
Research and Development Canada
A brief history of Research and Development in Canada
Governments of Canada have encouraged technological development and industrial research for over 100 years. In 1916 the government, in response to war pressure founded the National Research Council with a view to stimulating Scientific Research and Development. The understanding that Technology leads to economic development growth and wealth creation has led governments, both Liberal and Conservative, to encourage the development of technology through various policy initiatives. From its inception with the National Research Council in 1916 to the landmark passage of Bill C-15 in 2026, the SR&ED program has undergone a dramatic evolution, culminating in what is now the most significant expansion of R&D incentives in nearly half a century.
The journey began on June 10, 1916, with the establishment of the National Research Council. Direct tax incentives followed in 1944 via amendments to the Income War Tax Act, which allowed for a 100% deduction of scientific-research expenditures. The framework expanded through the 1960s and 70s with capital deductibility and the introduction of investment tax credits (ITCs) in 1977. The contemporary definition of SR&ED took root in the mid-1980s. The 1985 Wilson budget introduced the “all or substantially all” test and committed to including “experimental development” in the legislation—a term officially added to the Income Tax Regulations in 1986. However, the program faced a period of contraction following Budget 2012, which eliminated capital eligibility and reduced credit rates.
The Expansion: Budget 2025 and Bill C-15
It bears mentioning that recent Canadian government policy exacerbated in various ways the twin challenges of malinvestment and productivity declines. The policy direction reversed sharply with the December 16, 2024, Fall Economic Statement. These proposals were codified and expanded by the Carney government’s Budget 2025 and finalized in Bill C-15, which received Royal Assent on March 26, 2026.
On December 16, 2024, the federal government’s Fall Economic Statement proposed to restore SR&ED capital-expenditure eligibility, raise the Canadian Controlled Private Corporations (CCPCs) fully-refundable expenditure limit from $3 million to $4.5 million, lift the taxable-capital phase-out band to $15 million–$75 million, and extend the 35% enhanced refundable rate to eligible Canadian-owned public corporations (ECPCs).
Budget 2025, tabled by the Carney government on November 4, 2025, confirmed all of those measures and went further still: the enhanced-credit expenditure limit rises to $6 million (not $4.5 million), with phase-out tied to either prior-year taxable capital (CCPC) or average gross revenue over the prior three years (CCPCs and ECPCs), eliminating access to the 35% rate at $75 million. Both surprises — the $6 million ceiling and full retroactivity to taxation years beginning on or after December 16, 2024 — were welcome changes that signaled the Government of Canadas renewed focus on technology research and development.
Pre-claim approval: a new optional process (April 1, 2026)
Effective April 1, 2026, the CRA launched an elective Pre-claim approval process. Eligible small and medium businesses — Canadian-controlled private corporations, Canadian corporations, or Canadian partnerships in good standing with annual gross income of less than $25 million — can request up-front technical approval for up to three projects before work begins or costs are incurred. The CRA targets an eight-week determination from completion of the application, and an approval is valid for up to three years. For SR&ED claims that include pre-approved projects and require an expenditure review, processing time is cut from 180 days to 90 days.
Practitioner takeaways
Three planning points stand out for accountants.
First, There will be less need for CCPC owners to “bonus-down” corporate retained earnings to get below the $500K small business limit (below which there is a lower tax rate) for SR&ED-only purposes, which may in turn change the calculus of personal tax planning.
Second, Individuals and sole-proprietorships and partnerships with significant R&D spends should consider restructuring to be corporations instead of partnerships of proprietorships (ideally Canadian Controlled Private Corporations).
Third, Items claimed as “capital expenditure” for SR&ED must be removed from the calculation of capital cost allowance; this may require adjustments to accounting procedures. Purchase orders for items of capital equipment to be used in R&D should be marked as “Intended for R&D Purposes” and potentially allocated a unique / distinct accounting code. When multiple identical items of equipment are being purchased that might be used for a mix of R&D and production purposes (e.g. 5 type XYZ measuring instruments), each unit be designated (by serial number) as used for R&D or other and buy only new or “manufacturer refurbished” equipment.
Disclaimer
This communication contains general information only based on collective research. Before making any decision or taking any action that may affect your finances or your business, you should consult a qualified professional adviser. No representations, warranties or undertakings (express or implied) are given as to the accuracy or completeness of the information in this communication, and none of YALE PGC LLP, Integra International, related entities, employees or agents shall be liable or responsible for any loss or damage whatsoever arising directly or indirectly in connection with any person relying on this communication.
YALE PGC LLP and Integra International, and their related entities, are legally separate and independent entities.
Copyright
© 2026 Integra and YALE PGC LLP
About the Author:
Vijay Stevens, CPA
Vijay Stevens is a Chartered Professional Accountant (CPA) and Senior Tax Manager at Yale PGC based in Toronto, Ontario.
After completing the in-depth tax course Vijay has developed extensive expertise in complex Canadian tax topics—he specializes in navigating advanced compliance, restructuring and estate planning situations.
Leveraging an education in mathematics and computer science, Vijay is also deeply interested in the impact of AI in the accounting and tax world.
About Yale PGC:
At Yale PGC, we have invested in the same client promise for over 70 years: expert audit, accounting, tax and business advisory services.
Collaborative – Partnering with clients to truly understand their needs.
Customized – Designing personalized strategies for each client.
Continuous – Investing in long-term relationships that matter.
A highly progressive and collaborative team, our goal is to inspire client confidence through continuity. We are deeply invested in delivering customized client service and proven results, building real relationships with our clients over the long term. We achieve this with forward-thinking strategies that ensure clients realize both their personal and business goals. Our multi-talented team draws on the insight we glean from close client relationships to anticipate challenges, create opportunities and ultimately develop business solutions that minimize tax risk and maximize revenue.
Integra Profile
https://integra-international.net/find-an-integra-firm/find-firm-profile/name/yale-pgc-llp/
Member website
https://www.yalepgc.ca/
