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Advisor and Practitioner Program: Canada track

What a practitioner preparing SR&ED claims must master: the Income Tax Act definition and the CRA guidelines, the Why and How questions, the enhanced 35% and basic 15% credits and the expenditure limit, the proxy and traditional methods, Form T661 with its word-limited project descriptions and claim preparer disclosure, the 18 month reporting deadline and CRA reviews.

Advisor and Practitioner ProgramLast reviewed 2 October 2026
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Advisor and Practitioner Program

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This track is for accountants and advisors who prepare or review SR&ED claims for Canadian clients. Canada's Scientific Research and Experimental Development program gives a deduction against income and an investment tax credit for qualifying work carried out in Canada, administered by the Canada Revenue Agency. The claim is Form T661, which asks you to describe the work and calculate your expenditure. Three features shape the practitioner's work: a reporting deadline with no discretion to extend, Part 9 claim preparer information carrying a joint and several penalty, and technical and financial reviews before the claim is assessed.

How the Canada rules change the program

ModuleWhat is different in CanadaCountry page
Legislation and guidanceIncome Tax Act subsection 248(1) (definition), section 37 (deduction), sections 127 and 127.1 (credit), Regulations section 2900 (proxy); the CRA eligibility guidelines, the T4088 guide and the Claim Review Manual.SR&ED program
Eligibility analysisSR&ED is systematic investigation or search carried out in a field of science or technology by means of experiment or analysis. The CRA asks Why (a scientific or technological uncertainty that could not be resolved by standard practice) and How (a hypothesis, testing and conclusions).Eligibility
Advanced calculationsEnhanced rate of 35% up to the C$6 million expenditure limit for most CCPCs and, for tax years beginning after 15 December 2024, eligible Canadian public corporations; basic rate 15%. Proxy or traditional method, 80 percent of arm's length contract payments, assistance deducted.Proxy vs traditional method
Technical interviewsThe technical review procedure includes a site visit and interviews, and eligibility is determined on the supporting evidence provided, considering whether it was generated at the time the work was performed.Documentation
Reports and narrativesPart 2 of Form T661 asks, per project, for the uncertainties attempted to be overcome (line 242, up to 350 words), the work performed (line 244, up to 700 words) and the advancements achieved or attempted (line 246, up to 350 words).Form T661
Disputes and auditsThe CRA risk-assesses each claim on receipt and either accepts it as filed or selects it for a financial review, a technical review or a coordinated review. Then preliminary findings, a second review, a notice of objection within 90 days and the Tax Court of Canada.CRA reviews
Ethics, integrity and fee arrangementsPart 9 names the claim preparer; missing or incomplete information carries a C$1,000 penalty, jointly and severally. The claim preparer is a review selection factor. Whether contingent fees are permitted depends on the professional body the advisor belongs to; see knowyourfees.org.Briefing and evaluating an advisor

Forms and deadlines

Form or stepDeadline or ruleCountry page
RegistrationNone. Optional pre-claim approval has been available since 1 April 2026, to have planned work assessed before you incur most of the cost.How to claim
T2 returnWithin six months of the end of the tax year.Deadlines
Form T661 and Schedule 31 (Form T2038 (IND) for individuals)Filed with the return and no later than 12 months after its filing due date, so 18 months after year end for a corporation. The Minister has no discretion to extend the deadline.Form T661
Proxy method electionMade on Form T661 and, once made, irrevocable for that tax year.Proxy vs traditional method
Schedule 49Associated CCPCs allocate a single expenditure limit among themselves by filing an agreement.CCPC enhanced refund
Reassessment and objectionNormal reassessment period of three years after the original notice of assessment for a CCPC and four years for other corporations. Notice of objection within 90 days after the day of sending of the notice of assessment.Reviews and audits
RecordsSix years from the end of the last tax year to which they relate.Documentation

Key rules to know

The deadline attaches to each expenditure. An expenditure not identified on the prescribed form filed by the reporting deadline cannot be included in the SR&ED pool or earn an investment tax credit. A claimant may file an amended Form T661 to add projects or expenditures before the reporting deadline, and not after.

Directly engaged, and the specified employee limits. Directly engaged means hands-on involvement in the SR&ED, including performing experiments and analysis, directly supervising the work, and technical documentation of the work. In the proxy salary base a specified employee's salary is limited to 75 percent of salary and 2.5 times the year's maximum pensionable earnings. The CRA expects the portion claimed to be supported by time records or another reasonable method with documentary support.

Assistance and contracts reduce the base. Qualified expenditures are reduced by government assistance, non-government assistance and contract payments that the claimant has received, is entitled to receive or can reasonably be expected to receive. Provincial R&D tax credits are government assistance for this purpose.

Status and the limit. A corporation must be a CCPC throughout the tax year to earn the enhanced credit for that year. The expenditure limit is allocated among associated corporations and phased out where the associated group's taxable capital employed in Canada for the preceding year is between C$15 million and C$75 million. CCPCs may instead elect to calculate the expenditure limit using the same average gross revenue phase-out (C$15 million to C$75 million) that applies to eligible Canadian public corporations. See the CCPC enhanced refund page.

Worked example

Illustrative example. Lakehead Instruments Inc., a hypothetical CCPC with a 31 December 2025 tax year and taxable capital well below C$15 million, has one project that answers the Why and How questions. Directly engaged salaries are C$800,000, none paid to specified employees; materials consumed are C$100,000; an arm's length Canadian contractor was paid C$200,000; and the company receives a C$50,000 provincial credit. The practitioner compares the two overhead methods before electing on Form T661.

StepProxy methodTraditional method
Salaries, materials and 80% of the contractC$800,000 + C$100,000 + C$160,000 = C$1,060,000C$1,060,000
OverheadsPrescribed proxy amount: 55% of C$800,000 = C$440,000Directly related and incremental overheads identified in the records: C$150,000
Less government assistanceC$50,000 provincial creditC$50,000 provincial credit
Qualified expendituresC$1,450,000C$1,160,000
Credit at 35% (within the C$6 million limit)C$507,500C$406,000

The proxy method gives C$101,500 more credit, so the practitioner elects it on the T661, even allowing for the traditional overheads entering the section 37 pool as a deduction. Current expenditure at the enhanced rate is 100% refundable, so the C$507,500 is paid on assessment. Part 2 is written with the project engineer within the word limits, Part 9 names the practitioner, and the T661 and Schedule 31 are filed with the T2 return by 30 June 2026.

Self-check questions

Answer each question, then open it to compare.

A CCPC client with a 31 December 2025 tax year discovers an unclaimed project in August 2027. Can it be added?
No. The reporting deadline is 12 months after the filing due date of the return; a corporation's return is due six months after year end, so the deadline fell on 30 June 2027. An expenditure not identified on the prescribed form filed by the reporting deadline cannot be included in the SR&ED pool or earn an investment tax credit, and the Minister has no discretion to extend the deadline.
Directly engaged salaries are C$400,000, none paid to specified employees. What is the prescribed proxy amount, and is it deductible?
C$220,000. The prescribed proxy amount is 55 percent of the salary base. It is included in qualified expenditures for investment tax credit purposes but is not an SR&ED expenditure deductible under section 37.
Your client paid an arm's length contractor C$100,000 for SR&ED performed in Canada. How much enters qualified expenditures, and who claims the credit?
C$80,000: only 80 percent of arm's length contract payments and third-party payments for SR&ED are included in qualified expenditures. A contract payment received by a performer for SR&ED reduces the performer's qualified expenditures, so that the payer rather than the performer claims the credit.
Your firm prepared the T661 but Part 9 was left blank. What is the exposure?
Where claim preparer information required on Form T661 is missing or incomplete, a penalty of C$1,000 applies, for which the claimant and the claim preparer are jointly and severally liable. The claim preparer is also one of the factors the CRA uses in selecting claims for review.
The Research and Technology Advisor's preliminary findings treat a project as commercial production. What routes exist before the claim is assessed?
The Claim Review Manual requires the RTA to communicate preliminary findings and provide an opportunity to present additional information before finalising the SR&ED review report. The claimant may request a discussion with the RTA's research and technology manager and an administrative second review of the eligibility determination, conducted by an RTA not previously involved, before the claim is assessed. After assessment, a notice of objection must be served within 90 days.

Official sources

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