SR&ED 2025

Remember the SR&ED program? It’s growing up

If the SR&ED tax credit were a person, it would currently be in the middle of an awkward growth spurt.  The program that refunds a portion of your R&D costs is in flux: new guidance from the Canada Revenue Agency (CRA), tweaks to key policies, a change in government and whispers of bigger reforms still to come.  Many founders and finance leads have questions, ranging from “Is my loan now government assistance?” to “When can I deduct that fancy piece of lab equipment?” and even “Are we seriously talking about a $6 million expenditure limit?!”  Let’s break down what’s official, what’s proposed and what’s still rumour.

The CRA released a new review guide (July 2025)

The CRA quietly replaced its old Technical Review guide with a new review process guide on July 2 2025 .  The new guide describes what happens when the CRA reviews both the work and expenditures in your claim .  It explains why claims get pulled for review (risk assessment or random sampling) , outlines your rights and responsibilities and confirms that the CRA aims to process refundable claims selected for review within 180 days.  In short, audits aren’t going away; now there’s a playbook to follow.

Practical takeaways

• Expect more transparency in how reviews are conducted and what documentation the CRA will request.

• Keep contemporaneous evidence (tickets, lab notebooks, Git commits) ready. It will make the review meeting smoother.

• Audits are still a risk-based process, so strong evidence can reduce your audit odds.

Minor policy updates (January 28, 2025). A “fresh coat of paint”

On January 28 2025, the CRA released minor updates to three SR&ED policies :

1. Salary or Wages Policy – removed an obsolete formula for prorating wages for work performed outside Canada before February 25 2008 and updated wording for consistency .

2. Filing Requirements Policy – deleted pandemic‑era references and clarified that using the pool of deductible SR&ED expenditures and claim preparer information is not subject to the reporting deadline .

3. Gross Negligence Penalty Policy – renamed the old 1996 policy, incorporated subsequent legislative changes and clarified how the CRA applies penalties to overstated claims .

These tweaks don’t fundamentally change how you file or calculate credits, but they clean up confusing language and align the policies with current legislation.

Bill C‑69 and the “not‑really‑assistance” loans

A small but meaningful legislative change took effect on June 20 2024.  Bill C‑69, the Budget Implementation Act, amended the definition of government assistance in the Income Tax Act to exclude “bona fide” loans—loans from public authorities with reasonable repayment terms .  Loans that meet this definition will not reduce your SR&ED claim.  The change applies retroactively to loans made after December 31 2019 and could help start‑ups that received pandemic‑era loans.

The Fall Economic Statement 2024: proposals to boost SR&ED (not yet law)

On December 16 2024, the federal government tabled the Fall Economic Statement (FES 2024) and proposed a major expansion of the SR&ED program.  Key proposals included:

• Increase the expenditure limit for the enhanced 35 % refundable tax credit from $3 million to $4.5 million.

• Raise the taxable capital phase‑out thresholds from $10 million–$50 million to $15 million–$75 million.

• Extend eligibility for the enhanced 35 % refundable credit to Canadian public corporations.

• Restore capital‑expenditure eligibility for both the deduction against income and investment tax credit components .  Property acquired (or leases first payable) after December 16 2024 would qualify.

• Allow Canadian‑controlled private corporations (CCPCs) to elect a revenue‑based phase‑out rather than the taxable‑capital test.

These proposals were to apply to taxation years beginning on or after December 16 2024.  The government also announced $600 million in additional SR&ED program funding over four years and signalled interest in a patent box regime.  However, Parliament was dissolved before the FES proposals were enacted, and the subsequent election means they still need to be re‑introduced.  Think of FES 2024 as a wishlist rather than a rulebook.

After the April 2025 election: promises of an even bigger limit

Canada elected a new government on April 28 2025, and the winning party campaigned on super‑charging innovation.  Their platform pledged to raise the SR&ED expenditure limit to $6 million and extend the refundable credit accordingly. Tax commentary suggests the increase might take effect July 1, 2025 and be accompanied by a patent‑box regime and AI deployment tax credit.  The Parliamentary Budget Officer even costed a Liberal proposal to raise the limit from $4.5 million to $6 million.  None of these measures have been enacted yet; expect details in the next budget.

What does this mean for your claim (now and later)?

1. Follow current rules for now.  The SR&ED regime still offers a 35 % refundable credit on up to $3 million of qualifying expenditures for CCPCs and a 15 % non‑refundable credit for others .  The 2024 FES proposals and the 2025 election promises are not law.

2. Watch for legislative updates.  If/when the expenditure limit increases to $4.5 million or $6 million, more of your salaries and wages will attract the enhanced 35% rate.  The return of capital‑expenditure eligibility could make equipment purchases more attractive.

3. Bona fide loans no longer reduce your claim.  Review any government‑backed loans to see if they qualify as excluded loans under the new definition.

4. Be cautious about advice citing unpassed proposals.  Many blogs (this one included) enjoy speculating, but your tax filings must reflect the law in force.  Work with trusted advisors to model different scenarios and update your claim once new legislation takes effect.

Closing thoughts: Patience, paperwork and punchlines

SR&ED is complex, but it’s still one of the most generous R&D incentives on the planet.  2025 has already delivered a new review guide, policy clean‑up, a change in the definition of assistance and a flood of proposals to expand the program.  While we wait for Parliament to turn promises into legislation, keep doing the science, and keep your receipts.  The SR&ED program might be complex, but it’s developing and in a good way.