SR&ED Capital Expenditures Policy

Date: May 22, 2026

1.0 Purpose

This policy document deals with capital expenditures made by a claimant for the prosecution of scientific research and experimental development (SR&ED) carried on in Canada. This document clarifies the position of the Canada Revenue Agency (CRA) regarding capital expenditures when administering the SR&ED legislation under the federal Income Tax Act and the Income Tax Regulations.

The purpose of this document is to:

• Explain expenditures of a current nature after December 15, 2024
• Explain that capital expenditures made after December 15, 2024, may be claimed for SR&ED purposes
• Provide guidelines for determining that a claimant acquired property with the intent of using it for the prosecution of SR&ED carried on in Canada (SR&ED property)
• Explain the nature of SR&ED property as depreciable property
• Identify issues surrounding the sale of SR&ED property

2.0 Overview

2.1 Capital expenditures incurred after December 15, 2024

The 2025 federal budget announced that expenditures of a capital nature made after December 15, 2024, may qualify for SR&ED tax incentives. This includes capital expenditures made before December 16, 2024, for depreciable property that first became available for use after December 15, 2024. Further, for SR&ED purposes, expenditures of a current nature incurred after December 15, 2024, for the right to use property (see section 3.1.1) may also qualify for SR&ED tax incentives. The comments in section 10.2 may help you in making the distinction between a current and a capital expenditure.

Further, contract expenditures and third-party payments incurred after December 15, 2024, generally will no longer be reduced by the amount of any related expenditure of the SR&ED performer that is not an expenditure of a current nature (see section 3.1.2).

The following sections of this policy document are relevant to expenditures for property acquired after December 15, 2024:

• Section 3.0 Legislation
• Section 3.3 Available for use
• Section 9.0 Sale of SR&ED property
• Section 10.2 Current vs capital expenditures
• Section 10.4 Related current costs

Generally, a claimant carrying on a business in Canada in a tax year may, in calculating income from the business for the year, deduct expenditures for the prosecution of SR&ED carried on in Canada that relates to a business of the claimant.

To claim an SR&ED capital expenditure made after December 15, 2024, you must first determine whether the SR&ED expenditure is current or capital in nature. The distinction between current and capital is important because of the difference in investment tax credit (ITC) refundability rates for certain corporations. The distinction is also important because some expenses that would normally be capital for accounting and tax purposes and would be deducted over many years, are fully deductible in the year as SR&ED expenditures.

For more information on rates of refundable ITC, refer to the SR&ED Investment Tax Credit Policy, Appendix A.

Current expenditures made after December 15, 2024, on or in respect of SR&ED are considered to be those expenditures that do not result in the acquisition of land, a leasehold interest in land, or property that would otherwise be depreciable property (see section 5.0) to the claimant.

Capital expenditures for property acquired after December 15, 2024, for the prosecution of SR&ED carried on in Canada are only those expenditures that result in the acquisition of property that would be the claimant's depreciable property, other than a building (see Section 7.2.1) or a leasehold interest in a building (see section 7.2). Expenditures for non-depreciable property such as the acquisition of land, property that is described in a claimant's inventory, or eligible capital property (such as goodwill) cannot be included in the pool of deductible SR&ED expenditures as an SR&ED capital expenditure (see section 7.1).

Expenditures for depreciable property acquired after December 15, 2024, may qualify as SR&ED capital expenditures (see section 3.0) if it is either intended:

• To be used during all or substantially all (ASA) (see section 4.1) of its operating time (see section 4.2) in the prosecution of SR&ED carried on in Canada, or
• ASA of its value would be consumed in the prosecution of SR&ED carried on in Canada

The next steps to claiming an SR&ED capital expenditure are to determine whether the capital expenditures made after December 15, 2024, are for SR&ED carried on in or outside Canada (see section 7.3) and when the property became available for use (see section 3.3).

When a claimant sells their SR&ED depreciable property, the tax treatment of the proceeds may vary depending on whether a deduction for the property has previously been claimed (see section 9.0).

If a capital expenditure was not claimed on Form T661, Scientific Research and Experimental Development (SR&ED) Expenditures Claim by the reporting deadline, it will be classified as a depreciable property on Form T2SCH8, Capital Cost Allowance (CCA), in accordance with the Act.

For more information on the reporting deadline, refer to the SR&ED Filing Requirements Policy.

2.1.1 SR&ED capital expenditures as an income deduction

After December 15, 2024, capital expenditures a claimant made for SR&ED may be included in the pool of deductible SR&ED expenditures (see section 3.2). The claimant may deduct the cost incurred fully or partially in the tax year and carry forward any undeducted portion for deduction in a future tax year. The carry forward amount is subject to certain limits if the control of the corporation has been acquired by a person or group of persons.

For more information on deducting SR&ED expenditures, refer to section 8.0 of the Pool of Deductible SR&ED Expenditures Policy. For more information on acquisition of control, refer to section 5.1 of the SR&ED Investment Tax Credit Policy.

2.1.2 Introduction to shared-use-equipment

Expenditures for property acquired after December 15, 2024, that do not meet the ASA criteria (see sections 3.2.1 and 3.2.2) do not qualify as an SR&ED capital expenditure. However, where claimants perform SR&ED in an environment where their depreciable property is used for both SR&ED and commercial work, their property may qualify as shared-use-equipment (SUE) and be included in qualified SR&ED expenditures. To claim an expenditure on depreciable property that is primarily used during its operating time in SR&ED, the expenditure must meet the requirements of first term SUE. In the following tax year, to claim the expenditure, it must meet the requirements for second term SUE.

For more information on first term and second term shared-use-equipment, refer to the SR&ED Shared-Use-Equipment Policy. For more information on qualified SR&ED expenditures, refer to the Total Qualified SR&ED Expenditures for Investment Tax Credit Purposes Policy.

2.1.3 SR&ED capital expenditures as qualified SR&ED expenditures

A claimant may earn an ITC on SR&ED capital expenditures made after December 15, 2024, that meet the rules for qualified SR&ED expenditures. For an expenditure to be a qualified SR&ED expenditure, the expenditure must first meet the criteria as a deductible SR&ED capital expenditure (see sections 3.2 to 3.3). For more information on deductible SR&ED expenditures, refer to the Pool of Deductible SR&ED Expenditures Policy.

An SR&ED capital expenditure for depreciable property acquired after December 15, 2024, that is included in the pool of deductible SR&ED expenditures may not necessarily be a qualified SR&ED expenditure for ITC purposes. For example, a qualified expenditure does not include prescribed expenditures such as used equipment (see sections 8.0 to 8.2).

In addition, when a claimant purchases goods or services (other than where SR&ED work is performed on behalf of the claimant) from a person with whom the claimant does not deal at arm’s length at the time of the transaction, the amount of qualified SR&ED expenditures for ITC purposes may be restricted (see section 8.2).

For more information on qualified SR&ED expenditures, refer to the Total Qualified SR&ED Expenditures for Investment Tax Credit Purposes Policy.

3.0 Legislation

3.1 Capital expenditures made before December 16, 2024, cannot be claimed

Capital expenditures made before December 16, 2024, cannot be claimed for SR&ED purposes. This is also applicable to capital expenditures deemed to have been made before December 16, 2024, due to the available for use rules (see section 3.3).

3.1.1 Expenditures of a current nature incurred before December 16, 2024

After 2013 and before December 16, 2024, an SR&ED expenditure of a current nature cannot include an expenditure for the use of, or the right to use, property that would be capital property of the claimant if the claimant owned it. A lease cost for a capital property is any expense incurred to use capital property or to have the right to use capital property. Thus, an expenditure the claimant made for leasing a capital property after 2013 and before December 16, 2024, does not qualify for SR&ED tax incentives.

For more information on the use or right to use capital property, refer to the SR&ED Lease Expenditures Policy.

3.1.2 Capital look-through rule and the reporting of certain payments

The following information applies to capital expenditures made before December 16, 2024.

The look-through rule—a claimant’s particular expenditure made to a person or partnership (the performer) to be used in SR&ED must be reduced by the amount of any related expenditure of the person or partnership to whom the particular expenditure is made that is not an expenditure of a current nature of the person or partnership (see section 3.1.1). In other words, any contract expenditure and third-party payment of the claimant made to an SR&ED performer must be reduced by any related expenditure of the SR&ED performer that is for depreciable property, or the use of, or the right to use, capital property (if the capital property were owned by the SR&ED performer).

When a claimant is required to reduce their expenditure because of the look–through rule, the SR&ED performer is required to inform the claimant in writing of the amount of the reduction. This information is to be provided without delay if requested by the claimant and in any other case no later than 90 days after the end of the calendar year in which the claimant’s expenditure was made.

3.2 Capital expenditures made after December 15, 2024, can be claimed

3.2.1 Criteria for SR&ED capital expenditures: Traditional method

If a claimant elects to use the traditional method, an  SR&ED capital expenditure made after December 15, 2024, means an expenditure that, at the time it was incurred, was for the provision of premises, facilities, or equipment, when at that time it was intended that:

• The property would be used during all or substantially all (see section 4.1) of its operating time (see section 4.2) in its expected useful life for the prosecution of SR&ED carried on in Canada, or
• All or substantially all of its value would be consumed in the prosecution of SR&ED carried on in Canada.

When claiming an SR&ED capital expenditure, a claimant should not only consider whether the depreciable property will be used in SR&ED in the year the expenditure was made but should also consider the intended use over the lifetime of the property (see section 6.0).

Only those expenditures of a capital nature for the provision of premises, facilities, or equipment for the prosecution of SR&ED carried on in Canada that meet these criteria may be claimed as an SR&ED capital expenditure.

For more information on the traditional method, refer to the Traditional and Proxy Methods Policy.

3.2.2 Criteria for SR&ED capital expenditures: Proxy method

If a claimant elects to use the proxy method, an expenditure of a capital nature on or in respect of SR&ED made after December 15, 2024, means the same as it does in section 3.2.1 for the traditional method, except that it does not include general purpose office equipment or furniture (GPOEF) (see section 4.3).

For more information on the proxy method, refer to the Traditional and Proxy Methods Policy.

3.2.3 Additional criteria for SR&ED capital expenditures for both traditional and proxy methods

To include an SR&ED capital expenditure in the pool of deductible SR&ED expenditures:

• The expenditure must be made after December 15, 2024
• The property must be a new or used property that would otherwise be considered depreciable property (see sections 5.0 to 5.2 for further explanations regarding depreciable property, capital cost of property, capital cost allowance (CCA), and undepreciated capital cost (UCC))
• The expenditure must be made by a claimant for the prosecution of SR&ED carried on in Canada that is directly undertaken by, or on behalf of, the claimant and that is related to a business of the claimant, and
• The property must not have been available for use before December 16, 2024 (see section 3.3)

These criteria must be met for a capital expenditure to be included in the pool of deductible SR&ED expenditures.

3.2.4 SR&ED capital expenditure deduction deemed capital cost allowance

If the pool of deductible SR&ED expenditures includes an expenditure for depreciable property, the same property cannot also be claimed for CCA. Therefore, a claimant is prevented from duplicating deductions for capital expenditures by claiming CCA on such expenditures as well as deducting the SR&ED capital expenditure in determining their income for tax purposes in the year.

For the purposes of the rules concerning depreciable property (definition of depreciable property, recapture rules, etc.), an SR&ED capital expenditure deducted by the claimant in determining their income for tax purposes in the year will be deemed to be an amount that has been allowed to the claimant as CCA. The SR&ED capital expenditure deducted by the claimant in the year is deemed to be claimed as CCA to satisfy other rules of the Income Tax Act. The treatment of the sale of SR&ED property is an example of these rules (see section 9.1).

SR&ED property is also deemed to be of a separate prescribed class for CCA. As such, an amount may be required to be included in the claimant's income as recapture of CCA if the property is disposed of (see section 9.1). For more information, refer to the Recapture of SR&ED Investment Tax Credit Policy.

3.3 Available for use

A depreciable property must be available for use for the first time after December 15, 2024, to include the capital expenditure for that property in the pool of deductible SR&ED expenditures.

Generally, a property is considered to become available for use, for inclusion in the pool of deductible SR&ED expenditures and for ITC purposes as determined by the available for use rules concerning depreciable property.

Generally, an SR&ED property is considered to become available for use at the earliest of:

• The time at which the property is first used by the claimant, for the purpose of earning income. To determine when a property is first used, SR&ED work is considered to be for the purpose of earning income.
• The time the property is delivered or is made available to the claimant or to another person or partnership that will use the property for the benefit of the claimant, and is capable of producing or performing a commercially saleable product or service. Product or service includes an intermediate product or service that is, or will be, used or consumed by or for the benefit of the claimant or the other person or partnership in producing or performing any such product or service.

4.0 Terms

4.1 All or substantially all

All or substantially all (ASA) is generally accepted to mean 90% or more. Generally, where an expenditure is ASA, the total amount of the expenditure is deductible.

For SR&ED property, the ASA test will be met where it is determined that:

• The property's anticipated use for other purposes during its operating time in its expected useful life does not exceed 10%
• It is intended that not less than 90% of the value of the property is to be consumed in the prosecution of SR&ED carried on in Canada

The ASA test for SR&ED property is based on intent as opposed to actual use even though the CRA may look at subsequent use to evaluate intent (see section 6.0).

4.2 Operating time

SR&ED use of SR&ED property should be determined as a percentage of the total operating time on a tax year basis. The term operating time is not defined in the Income Tax Act but generally means the time the equipment usually runs or functions during the tax year.

Time spent to set up equipment for SR&ED and time spent to switch the equipment back to another use will usually be considered to be operating time in which the equipment is used for the prosecution of SR&ED carried on in Canada, as long as it is reasonable in the circumstances. The time that the machine is idle is not included in the calculation because it is not considered operating time.

Whether equipment is used for the prosecution of SR&ED carried on in Canada during its operating time is a question of fact that can only be determined on a case-by-case basis. The onus is on the claimant to maintain documentation, such as a logbook, which would support the SR&ED use of the equipment for the period (see section 11.0).

4.3 General purpose office equipment or furniture

General purpose office equipment or furniture (GPOEF) includes all furniture, such as desks, chairs, lamps, filing cabinets, and bookshelves. It also includes photocopiers, fax machines, telephones, cell phones, and calculators.

Computers, including hardware, software, and ancillary equipment, are not considered to be general purpose office equipment or furniture.

The only difference in determining SR&ED capital expenditures under the traditional method and the proxy method for expenditures made after December 15, 2024, is that expenditures for GPOEF must be excluded where the proxy method is used. If a claimant uses the proxy method, expenditures to acquire GPOEF are included in a prescribed class and are eligible for capital cost allowance (CCA) (see section 5.1) at the prescribed rate.

GPOEF is excluded from the definition of first term shared-use-equipment and therefore cannot be second term shared-use-equipment. For more information, refer to the SR&ED Shared-Use-Equipment Policy.

5.0 Depreciable property

Depreciable property is any property that has an expected useful life and / or benefit of more than 12 months and on which the claimant would be allowed to claim capital cost allowance (CCA) (see section 5.1). The cost of this property (see section 5.2) is amortized over a number of tax years.

Only expenditures made after December 15, 2024, that result in the acquisition of new or used depreciable property, other than a building or a leasehold interest in a building are eligible for inclusion in the pool of deductible SR&ED expenditures. Consequently, expenditures for the acquisition of non-depreciable property (including land, a leasehold interest in land, property described in the claimant's inventory, or eligible capital property) cannot be included in the pool of deductible SR&ED expenditures (see section 7.1).

Additional comments in Income Tax Folio S3-F4-C1, General Discussion of Capital Cost Allowance, may also be of assistance in determining whether a particular property is depreciable property.

5.1 Capital cost allowance

A claimant may acquire a depreciable property, such as equipment, to use in its business or professional activities. The cost of the property cannot be deducted when calculating net business income for the tax year. However, since these properties wear out or become obsolete over time, their cost can be deducted over a number of years. For income tax purposes this deduction is called capital cost allowance (CCA). Generally, the undepreciated capital cost (UCC) is the balance left after CCA is deducted from the capital cost of a depreciable property included in a prescribed class. As stated in section 3.2.4 an SR&ED capital expenditure deducted by the claimant in determining their income for tax purposes in the year will be deemed to be an amount that has been allowed to the claimant as CCA.

SR&ED capital expenditures may be claimed only for property owned (see section 5.1.1) by the claimant or property in which the claimant has a leasehold interest.

5.1.1 Ownership of capital property

SR&ED capital expenditures made before December 16, 2024, cannot be claimed. SR&ED capital expenditures are limited to the acquisition of depreciable property acquired after December 15, 2024.

Depreciable property is any property for which CCA can be claimed. CCA may be claimed only for property owned or deemed to be owned (see section 5.1.3) by the claimant or property in which the claimant has a leasehold interest. Thus, to claim an allowable SR&ED capital expenditure, the expenditure for the SR&ED property must result in the claimant owning, or obtaining a leasehold interest in, the SR&ED property. See section 7.2 for a discussion of the acquisition of buildings or leasehold interest in buildings which are not allowed as SR&ED capital expenditures.

Where a claimant acquires a property, ownership of the property will be obtained either at the time the cost was incurred or at a later date. It is a question of fact whether or not a claimant owns or has a leasehold interest in an SR&ED property.

A claimant who acquires or holds property as an agent or nominee for another cannot claim the property as an SR&ED property (and cannot claim CCA on such property).

In computing the income of a partnership, the Income Tax Act requires that partnership property (including SR&ED property) be accounted for as if it were owned at the partnership level. For more information, refer to the SR&ED Claims for Partnerships Policy.

5.1.2 No ownership of property

There may be circumstances in which neither a freehold nor a leasehold interest in property is acquired. In these circumstances CCA cannot be claimed in respect of such property. For example, if a claimant constructs and incurs the cost to build a structure on land owned by another person (or otherwise incorporates capital property into property owned by another as an integral part thereof) and does not have a leasehold interest in or ownership of the structure (or capital property), CCA may not be claimed in respect of the structure (or capital property). Since CCA could not otherwise be claimed for this type of property, it would not be depreciable property. Consequently, expenditures for this type of property would not be allowed as an SR&ED capital expenditure.

5.1.3 Deemed ownership of leased property

When an arm’s length lessor acquires new property that has yet to be leased and then jointly elects with the first lessee of the property under section 16.1 of the Act, the property will be considered to be new property acquired by the lessee. For SR&ED purposes, the property is eligible to be included in the pool of deductible SR&ED expenditures, subject to meeting all other required criteria.

The following conditions must be met to make an election under section 16.1 of the Act:

• The claimant leases property for a period exceeding one year
• The lessor is a resident of Canada (or operates a business through a permanent establishment in Canada) and deals at arm’s length with the claimant
• The property to the lessor was new property and the claimant is the first lessee
• The lessor cannot be exempt from tax
• The lessor and claimant must jointly make the election under section 16.1 of the Act and file the election with their income tax returns for the tax year the lease agreement was entered into

Outcome when an election under 16.1 of the Act is made:

• The claimant is deemed to have acquired the property at its fair market value and borrowed an equal amount from the lessor.

The lease payments are deemed to be blended payments of principal and interest. The expenditure would not be considered to be prescribed under subparagraph 2902(b)(iii) of the Income Tax Regulations (see section 8.1).The treatment of this transaction for SR&ED purposes is the same as for any other acquisition of property. The property must still meet the intent criteria (see section 6.0) and the all or substantially all (ASA) criteria (see sections 3.2.1 and 3.2.2) to be allowable as an SR&ED capital expenditure. SR&ED capital expenditures made before December 16, 2024, cannot be claimed.

5.2 Capital cost of property

These rules are used to determine the amount of SR&ED capital expenditures made after December 15, 2024, that may be included in the pool of deductible SR&ED expenditures.

When referring to depreciable property (see section 5.0) the term capital cost of property generally means the full cost to the claimant of acquiring the property and includes:

• The purchase price
• Legal, accounting, engineering, installation, and other fees that relate to the buying or construction of the property (not including the part that applies to land)
• Custom and excise duties, transportation, and other acquisition costs, and when they are significant, storage costs
• The cost of any additions or improvements made to the property after it was acquired, provided these costs were not claimed as a current expense
• In the case of a property a claimant manufactures for its own use, it includes material, labour, and overhead costs reasonably attributable to the property, but does not include any profit that might have been earned had the property been sold

6.0 Intent

Sections 6.0 to 6.8 are only relevant if the depreciable property was acquired and available for use after December 15, 2024.

To claim expenditures on depreciable property, the claimant must intend to use the property all or substantially all (ASA) (see Section 4.1) of its operating time (see Section 4.2) in its expected useful life in the prosecution of SR&ED carried on in Canada. It can be difficult for a claimant to determine the future use of the property at the time of acquisition. In making this determination, the claimant must consider the intended use of the property in the year it was acquired and over its expected useful life.

Subsequent use of the property may provide evidence of the claimant's intent at the time the expenditure was made. However, when the subsequent use is contrary to the claimant's stated intent, it is the claimant's responsibility to support their contention that the property was intended to be used ASA of its operating time in its expected useful life in the prosecution of SR&ED carried on in Canada. In cases where property, acquired with the intent of using it ASA in SR&ED, was later used in commercial activities or was sold, the recapture rules for ITCs will generally apply. For more information, refer to the Recapture of SR&ED Investment Tax Credit Policy.

The Financial Reviewer and Research and Technology Advisor will determine whether the intent test is met by taking into account the circumstances related to the acquisition of the property.

There is neither a unique test nor exacting jurisprudence that can be fully utilized in establishing the claimant’s intent in regard to the acquisition of a property. The following eight factors may be considered and should be helpful in reaching a decision. While these factors may be useful in the decision-making process, they are not in themselves conclusive evidence of intent:

• Reason for purchase
• Potential use of property
• Actual use of property
• Type of SR&ED
• SR&ED environment
• Length of SR&ED project
• Claimant's past practices
• Planning documents

The list of factors is not exhaustive, and intent can only be determined after examining all the relevant facts.

6.1 Reason for purchase

The claimant should keep all records that support that at the time of acquisition, the depreciable property was intended:

• To be used ASA of its operating time in its expected useful life in the prosecution of SR&ED carried on in Canada, or
• ASA of its value would be consumed in the prosecution of SR&ED carried on in Canada

We refer to this as the intent test.

6.2 Potential use of property

When a claimant acquires a depreciable property to use in their SR&ED, the claimant must consider the potential use of the property over its expected useful life and what the fair market value of the property might be after it is no longer used in SR&ED. The intent test will normally not be met where property is acquired for both SR&ED and commercial purposes. To establish whether or not the acquisition of a property may have a dual purpose, it is necessary to determine if the claimant uses similar property for commercial purposes in its business.

Property that does not lend itself to activities other than SR&ED is likely to meet the intent test. However, where similar property is used for commercial purposes, the claimant should be able to demonstrate to the CRA that their intent was to use that particular property ASA for SR&ED. Or the claimant should consider claiming the property as shared-use-equipment if it is not ASA capital.

6.3 Actual use of property

The actual use of property should in most cases confirm a claimant's intent. However, while the subsequent use of property may provide evidence of the claimant's intent at the time the property was acquired, it is not conclusive evidence of intent.

The SR&ED legislation provides for an intent test as opposed to a use test. Therefore, the actual use of a property is only one factor that needs to be considered when determining the intent of a claimant. In some cases, the intent test may still be met where, due to a significant and unforeseeable change in circumstances, a property acquired with the intent of being used ASA (see section 4.1) in SR&ED was later used for other activities. In such cases, when there is a change of use, the claimant may need to repay some of the ITCs they previously received for the property. For more information, refer to the Recapture of SR&ED Investment Tax Credit Policy.

6.4 Type of SR&ED

Where the SR&ED involves the construction of a custom product or commercial asset it is necessary to determine whether the property is an instrument to facilitate SR&ED or whether it is an integral part of the end product. Where it is intended that property will become part of a custom product or commercial asset, the expenditure to acquire that property will not generally be allowed for SR&ED purposes.

In some SR&ED projects, property may be destroyed or rendered valueless through the SR&ED process. A claimant has to show that at the time the property was acquired, the claimant intended to destroy or cause the property to be rendered valueless through the SR&ED process.

The intent test will not be met, if due to unforeseen circumstances, a property acquired with the intent of being used in commercial activities is destroyed or rendered valueless during the prosecution of SR&ED carried on in Canada. In such a case the claimant may be entitled to an ITC if the property is considered to be shared-use-equipment. For more information, refer to the SR&ED Shared-Use-Equipment Policy.

6.5 SR&ED environment

The environment in which SR&ED is undertaken will sometimes support whether a property meets the intent test. For example, if the property is being used in an area dedicated to R&D activities only, this may support the intent test.

6.6 Length of SR&ED project

The length of an SR&ED project will vary depending on the type of research being undertaken. Suppose a property will be used in only one SR&ED project. In determining whether the intent test is met, it is necessary to take into consideration the length of a research project as compared to the expected useful life of the property.

For a capital expenditure to be allowable for SR&ED purposes, a claimant must intend to use the property during ASA of its operating time (see Section 4.1 and Section 4.2) in its expected useful life for the prosecution of SR&ED carried on in Canada. If a claimant intends to use the property to carry on SR&ED over a short period of time, the intent test would not generally be met where this period is less than the expected useful life of the property. However, in making this determination the intended use of the property for SR&ED purposes throughout its useful life should also be considered.

The cost of a depreciable property may also qualify as an SR&ED capital expenditure where it is intended that ASA of the value of the property would be consumed in the prosecution of SR&ED carried on in Canada. Where it is intended that ASA of the value of the property would be consumed in the prosecution of SR&ED carried on in Canada because technology is changing rapidly or because a property is actually destroyed in the SR&ED process, the length of the SR&ED project may be irrelevant in determining whether the expenditure for this property is allowable as an SR&ED capital expenditure.

6.7 Claimants past practices

A claimant's past practices may be relevant in determining whether the intent test has been met if the claimant acquired similar property in a previous year. If an SR&ED project is carried on over a number of years, how property was treated in a previous year could be a factor in determining the intent of the claimant for similar property.

6.8 Planning documents

Planning documents that describe the use of the property such as a project plan, a business case, or any other document that is a request to secure funding for a research project are helpful in determining whether one of the intent tests was met.

Planning documents generally contain contingencies for the eventual use of the property if a research project fails or when it is completed.

The SR&ED work, carried on by a claimant, is performed within the overall business environment of that claimant. From a business perspective, it is important to have contingency plans to remain competitive and sustain a viable business operation. Planning documents must be viewed within the context of the business operation. It is necessary to place more emphasis on the claimant's intended use of the property in the SR&ED environment and less emphasis on the contingent use of the property in a larger business context.

7.0 Expenditures not allowed as SR&ED capital expenditures

7.1 Non-depreciable property

Expenditures for the acquisition of non-depreciable property, such as, land or a leasehold interest in land, property described in the claimant's inventory, or eligible capital property (such as goodwill), cannot be included in the pool of deductible SR&ED expenditures.

7.2 Expenditures for buildings

Capital expenditures that relate to the acquisition of a building (other than a special purpose building prescribed by regulation, see Appendix A), do not constitute expenditures in respect of SR&ED. These expenditures cannot be included in the pool of deductible SR&ED expenditures nor can they be included in qualified SR&ED expenditures for ITC purposes. For more information on the exclusion of lease costs (rent) for a building, refer to the SR&ED Lease Expenditures Policy. Capital expenditures made after 2013, and before December 16, 2024, do not qualify for SR&ED tax incentives, see sections 3.1 to 3.1.2.

If the requirements for SR&ED capital expenditures are met, the purchase or rental of a structure or a portable shelter made after December 15, 2024, is not restricted and can be included in the pool of deductible SR&ED expenditures.

The comments in Income Tax Folio S3-F4-C1, General Discussion of Capital Cost Allowance , may be of assistance in determining whether a particular property is depreciable property.

7.2.1 Meaning of "building"

Building is a broad term covering any structure with walls and a roof affording protection and shelter that is affixed to the land. For example, a mobile home would be considered a building if the wheels, the trailer hitch, brakes, and emergency lights are removed and the unit is affixed to cement pads on the ground and services, such as hydro and water, are installed.

The term structure includes anything of substantial size that is built up from component parts and intended to remain permanently on a permanent foundation. This definition of structure was considered by the Supreme Court of Canada in British Columbia Forest Products Ltd v. Minister of National Revenue 71 DTC 5178, which also concluded that the term structure when used in the context of building or other structure does not mean only a structure in the nature of a building. Bridges or hydro-electric transmission towers, for example, while clearly not buildings, are structures.

Portable shelters such as housing, offices, and other service units are regarded as buildings if they are installed and intended to remain in a particular location. Such things as tents, canvas marquees and air-supported fabric domes that are not part of a rigid structure are not considered to be buildings or structures.

Property that is attached to a building, however firmly, is included in capital cost allowance (CCA) Class 8 if it is acquired exclusively for those purposes stated in CCA Class 8. For example, concrete footings, foundations, and structural steel exclusively for the support of machinery are regarded as CCA Class 8 property. Stairs and platforms, the sole purpose of which is to provide access to machinery, also fall within CCA Class 8, whether they are attached to the building or the machinery.

The comments in the archived Interpretation Bulletin IT-79R3, Capital cost allowance – Buildings or other structures, may be of assistance in distinguishing between expenditures for the acquisition of buildings and expenditures for the acquisition of other structures.

7.2.2 Exception: Third-party payments concerning buildings may be allowed

A claimant's payment enabling the recipient to acquire a building, or a leasehold interest in a building cannot be included in the pool of deductible SR&ED expenditures as a capital expenditure. After December 15, 2024, these types of payments may be allowed as a third-party payment if one of the following conditions is met:

• The recipient of the payment is an approved research institute or an approved association, provided the claimant and the recipient deal at arm’s length
• The recipient is an approved university, college or organization, provided that the payer does not acquire an interest in that building

For more information, refer to section 6.2 of the Third-Party Payments Policy.

7.3 Expenditures for property that is used outside Canada

The SR&ED Program is designed to encourage SR&ED in Canada. The location of the work will indicate whether the SR&ED is carried on inside or outside Canada.

Expenditures of a capital nature that pertain to SR&ED carried on outside Canada are not included in the pool of deductible SR&ED expenditures. These expenditures would be included on Schedule T2SCH8, Capital Cost Allowance and deducted in the normal manner.

Capital expenditures for equipment acquired from outside Canada, that is used in the prosecution of SR&ED in Canada may be included in the pool of deductible SR&ED expenditures provided all other requirements are met.

8.0 SR&ED capital expenditures that are not allowed as qualified SR&ED expenditures

The following sections discuss SR&ED capital expenditures that are not allowed as qualified SR&ED expenditures for ITC purposes.

8.1 SR&ED capital expenditures prescribed by the Income Tax Regulations

The following explains prescribed expenditures in relation to expenditures of a capital nature incurred before December 16, 2024, and prescribed expenditures of a capital nature incurred after December 15, 2024.

Before December 16, 2024:

Before December 16, 2024, prescribed expenditures are expenditures that are incurred in respect of:

• The acquisition of property that is qualified property or qualified resource property as defined in the Income Tax Act
• The acquisition of property that has been used or acquired for use or lease or for any purpose before it was acquired by the claimant (see section 8.1.1)

The expenditures for the property described above are generally not expenditures of a current nature (see section 3.1.1). Prescribed expenditures are excluded from the definition of qualified SR&ED expenditures.

After December 15, 2024:

After December 15, 2024, prescribed expenditures of a capital nature are expenditures that are incurred in respect of:

• The acquisition of property, except if it is:
  • For first term shared-use-equipment (SUE) or second term SUE
  • For the provision of premises, facilities, or equipment for which the all or substantially all rule for capital expenditures applies
  • For a prescribed special-purpose building
• The acquisition of qualified property as defined in the Act
• The acquisition of property that has been used or acquired for use or lease or for any purpose before it was acquired by the claimant (see section 8.1.1)

Prescribed expenditures are excluded from the definition of qualified expenditures. Consequently, an expenditure for SR&ED depreciable property made after December 15, 2024, that may be allowed in the pool of deductible SR&ED expenditures (see section 3.2) will not be a qualified SR&ED expenditure, if it is prescribed.

Qualified property is defined in the Act and earns investment tax credits (ITCs) apart from those earned under the SR&ED Program. ITCs are prevented from being earned twice in respect of a property that is both qualified property and a qualified expenditure for SR&ED carried on in Canada.

8.1.1 Acquisition of used property

Before December 16, 2024:

Before December 16, 2024, expenditures for capital property do not qualify for SR&ED tax incentives. The rules for prescribed expenditures for used property are not generally applicable to expenditures of a current nature (see section 8.1).

After December 15, 2024:

After December 15, 2024, expenditures for capital property that was used or acquired for use or lease or for any purpose whatsoever before the claimant acquired it are prescribed expenditures. An expenditure made after December 15, 2024, for capital property that was used or leased before the claimant acquired it is allowed as an SR&ED capital expenditure but does not entitle the claimant to an ITC.

For ITC purposes, property must not only be new when the claimant acquired it, but it must not have been acquired for use or lease or for any purpose whatever by any previous owner. As a result of these requirements, if a property that has been used or was acquired for a use (even though unused) is transferred to a new owner, eligibility for the ITC is not transferable. For a specific exception regarding leased property where an election under section 16.1 of the Act has been made, see section 5.1.3.

The cost to acquire a piece of equipment that is used regularly for demonstration purposes is considered to be a prescribed expenditure. However, new equipment that is demonstrated for or tested by a prospective purchaser of that particular piece of equipment would not normally be considered to have been used for a purpose.

8.1.2 Refurbishment of used property

Significant refurbishments to a claimant's SR&ED property (equipment) after December 15, 2024, will normally be an allowable SR&ED capital expenditure providing the refurbished equipment continues to satisfy all other SR&ED eligibility conditions (see section 3.2).

Where used equipment is refurbished by a vendor and those refurbishments are so significant that the equipment, when acquired by a claimant can be said to be new, the expenditure for the equipment would qualify for the ITC as a capital expenditure, provided that all other eligibility requirements are met. However, where, subsequent to the acquisition of used equipment, a claimant carries out significant refurbishments only the costs of the refurbishments may qualify as an SR&ED capital expenditure.

Based on the ordinary meaning of the word significant and the phrase when acquired by the claimant, can be said to be new, the refurbishments should go beyond the simple replacement of worn parts to the point where the refurbishments bring the equipment to the current state of the art (a new state). Refurbishments that are merely performance related enhancements that do not change the essential nature of the equipment would not qualify as new.

It would be a question of fact whether particular refurbishments would bring the equipment to a new state such that the same useful life will be produced as newly manufactured equipment. The following are factors to consider when determining if particular refurbishments would bring a piece of equipment to a new state:

• The proportion of parts that have been replaced or rebuilt as new
• The number of major parts of the equipment (in importance) that have been replaced with new parts or have been rebuilt as new

The list of factors is not exhaustive and whether particular refurbishments would bring a piece of equipment to a new state can only be determined after examining all the relevant facts.

8.2 Expenditures for purchases of SR&ED capital property from non-arm's length parties

When the claimant purchases a property from an entity with whom they do not deal at arm’s length, there is an impact on the allowable amount of the qualified SR&ED expenditure for ITC purposes. In this case the qualified expenditure is limited to the cost incurred by the non-arm's length (NAL) person to provide the property. In the case of a property sold to the claimant by a non-arm's length supplier, the eligible amount of qualified SR&ED expenditure for ITC purposes is limited to lesser of:

• The capital cost of the property (see section 5.2) to the claimant, or
• The adjusted selling cost of the property to the supplier

Determining adjusted selling cost involves tracing the costs incurred by non-arm's length parties in providing a property. The cost to the party performing the SR&ED will be the cost paid for by the NAL party who acquired the property at arm's length. There will be no inter-company profit included in the cost of the property to the performer.

For more information on non-arm’s length situations, refer to the Total Qualified SR&ED Expenditures for Investment Tax Credit Purposes Policy. The Income tax folio, S1-F5-C1, Related persons and dealing at arm's length, describes in general terms the criteria for determining whether persons deal with each other at arm's length.

9.0 Sale of SR&ED property or change in use of SR&ED property

9.1 Recapture of deemed capital cost allowance for SR&ED capital expenditures

A disposition of depreciable property (sale of SR&ED property) is subject to the provisions of the Income Tax Act dealing with capital cost allowance (CCA) recapture and capital gains and losses. Where any depreciable property (see section 5.0) is disposed of for proceeds in excess of the capital cost of the property (see section 5.2) to the claimant, that disposition may give rise to a capital gain or income depending on the facts. However, any loss on the disposition of depreciable property is specifically excluded from a claimant's capital loss and, as a result, no deduction is permitted for such losses. However, it generates a terminal loss.

There may be circumstances where the claimant sold SR&ED property during the year, but there are undeducted expenditures for the SR&ED property in the pool of deductible SR&ED expenditures at the end of the year. Effectively these undeducted expenditures represent the undeducted CCA (see section 3.2.4) of the SR&ED property.

A proportion of the proceeds of disposition for the SR&ED property that is sold may be allocated to the undeducted expenditures for the SR&ED property, which will reduce the claimant's pool of deductible SR&ED expenditures. Generally, the sale proceeds or the amount of undeducted expenditures for the property, whichever amount is less, would be included in the pool of deductible SR&ED expenditures.

A proportion of the proceeds of disposition for the SR&ED property that is sold may be allocated to the (previously) deducted expenditures for the SR&ED property, which will be included in the claimant's income calculation as CCA recapture.

Example:

Facts

The undeducted SR&ED expenditures balance carried forward from the prior year (line 450 of Form T661) is $5,000. An SR&ED property was sold during the year for $1,000. Its original cost was $10,000 and ITC of $1,500 was earned on the property. The amount of undeducted expenditures for the SR&ED property included at line 450 of Form T661 is $600.

Solution:

The amount at line 440 on Form T661 is the lesser of the proceeds of disposition ($1,000) and the amount of undeducted expenditures for the SR&ED property ($600). Line 440 amount on the Form T661: $600.

If the sale proceeds are more than the undeducted balance of SR&ED expenditures for the property, the difference is generally included in income up to the amount of recapture of CCA (the claimed deduction for the SR&ED property). If the sale proceeds are more than the original cost of the property, the excess is either a capital gain or income, depending on the facts of the case.

The amount of recaptured CCA is the lesser of the original cost ($10,000) and the proceeds of disposition minus the line 440 amount on Form T661 ($1,000 - $600 = $400). The recapture of CCA of $400 should be included on Schedule T2SCH1, Net Income (Loss) for Income Tax Purposes, for the year.

Where all the expenditures for the SR&ED property remain undeducted in the previous year's pool balance of deductible SR&ED expenditures reported at line 450 of Form T661, recapture with respect to SR&ED capital expenditures will be reflected as a reduction to the pool of deductible SR&ED expenditures. In this case, provided the proceeds are less than the capital cost of the property, which is normally the case, the proceeds can be entered at line 440 of Form T661. This effectively removes the appropriate portion of undeducted expenditures for the property included in the prior year balance of the pool of deductible SR&ED expenditures. In the event the proceeds exceed the capital cost of the property to the claimant, the capital cost of the property should be recorded at line 440 of Form T661 and the excess reported as capital gain or income depending on the facts of the case. If the pool balance of deductible SR&ED expenditures at the end of the prior year is zero, the recapture should be reported on Schedule T2SCH1, Net Income (Loss) for Income Tax Purposes.

9.2 Recapture of SR&ED investment tax credit

When the claimant sells the SR&ED property or converts it to commercial use, there may be recapture of ITC earned on SR&ED expenditures for that property. These rules are in addition to the recapture of CCA for deducted and undeducted SR&ED capital expenditures rules noted in section 9.1.

At the outset of an SR&ED project, a claimant may intend to use a depreciable property in SR&ED throughout its useful life, but subsequently change its use or dispose of it. The recapture rules are intended to reflect the net cost of performing SR&ED. Since this net cost cannot be determined at the outset, the recapture rules will reverse all or a portion of the ITC when the sale of the property takes place or when it is converted to commercial use.

If an SR&ED property is converted to commercial use (or disposed of to a non-arm's length party), the fair market value of the asset must be determined at the point in time the change of use occurs. The fair market value of the capital asset will be used when filing the Income Tax return for the tax year to calculate the ITC recapture and the deduction from the pool of deductible SR&ED expenditures. If the disposition occurs to a non-arm's party, see section 6.3 of the Recapture of SR&ED Investment Tax Credit Policy.

The income tax filing for the tax year of the change in use will include the following:

1. The calculation of ITC recapture using either:
   1. Form T2038 Investment Tax Credit (Individuals)
   2. T2SCH31 Investment Tax Credit – Corporations
2. The addition of the amount of ITC recapture to the Part I Tax payable
3. The deduction of the fair market value of the capital asset from the pool of deductible SR&ED expenditures to the extent of any undeducted portion of the capital asset remaining in the pool
4. The inclusion of the fair market value of the capital asset on the T2SCH8 Capital Cost Allowance

In the subsequent income tax return, the amount of SR&ED ITC recaptured in the prior tax year is added in the pool of deductible SR&ED expenditures.

For more information, refer to the Recapture of SR&ED Investment Tax Credit Policy.

10.0 Related topics to SR&ED capital expenditures

10.1 Development of an asset

SR&ED property acquired after December 15, 2024, used in the development of an asset (such as prototype, pilot plant / commercial plant, custom product / commercial asset), must be all or substantially all (ASA) attributable to the prosecution of SR&ED in Canada for the expenditures to be eligible. This would require that the property to which the expenditure relates:

• Have minimal life expectancy (less than 10%) after its involvement in the development of the asset
• Have limited value (less than 10%) after its involvement in the development of the asset; or
• Be used in the performance of other SR&ED after its involvement in the development of the asset

Capital expenditures incurred before December 16, 2024, do not qualify for SR&ED tax incentives.

10.2 Criteria in determining whether an expenditure is on account of capital or a current expense

The following criteria, developed by the Courts, are to be considered in determining whether an expenditure is on account of a capital or a current expense. The Courts have generally taken the position that there is no rigid test to be used to determine whether an outlay is capital in nature or a current expense and that it is very much a question of fact. The circumstances specific to each case will be determinative of the issue. The courts have considered the following factors:

• Enduring benefit
• Maintenance or betterment
• Integral part or separate property
• Relative value
• Acquisition of used property
• Anticipation of sale

For more information on these factors, refer to Income Tax Folio S3-F4-C1, General Discussion of Capital Cost Allowance.

10.3 Expenditures for software and software licenses after December 15, 2024, may be capital or current expenditures

Since SR&ED expenditures cannot include expenditures for property or the use of, or the right to use property before December 16, 2024, the following comments apply to expenditures for software incurred after December 15, 2024.

Software and the rights or licenses to use computer and / or systems software fall within prescribed classes for capital cost allowance (CCA) purposes. For example, definitions in the Regulations, in part, read:

"Computer software includes systems software and a right or licence to use computer software" and

"Systems software means... and includes a right or licence to use [systems software] …"

Software intended to be incorporated into a product cannot be included in the pool of deductible SR&ED expenditures.

However, a deduction for an expenditure on something that is merely a tool for performing SR&ED that will not be incorporated into a product created by a claimant may be included in the pool of deductible SR&ED expenditures if it otherwise qualifies. An example would be software purchased for use as a tool in computer-aided design.

In determining whether the acquisition cost of software and software licences should be treated as a current expenditure or treated as a capital expenditure, the nature, purpose, and anticipated life of the computer software must be considered. If the acquisition would benefit only the current fiscal period, the relevant cost would be considered a current expenditure. If the nature of the acquisition were of an enduring nature such that it would provide benefits beyond the current year, the acquisition should be considered capital in nature. Computer software is generally considered to have an enduring nature where its useful life is anticipated to last beyond one year.

In determining whether a particular expenditure is on account of capital (capital expenditure) or income (current expenditure) within the provisions of the Income Tax Act, the question to be answered is whether a payment or a legal obligation to pay was related to the acquisition of a depreciable property, (see section 5.0), or whether the payment was simply for the use of the property. When answering such a question, an expenditure is considered to have been made at the time a payment is made unless the claimant has entered into a legal obligation to make one or more future payments. The treatment of the payment or the debt giving rise to the legal obligation to pay must be determined at the time of payment or when a definite obligation to make the payment has been entered into.

In determining whether a payment can be considered a current expense in the form of a monthly payment or whether the individual payments or total obligation should be treated as a depreciable property (SR&ED property), it is not the individual payments that have to be considered but rather the total obligation to pay in relation to that which was acquired.

For discussion purposes, assume that a user needs the use of computer software and must make a choice between a fixed term five-year commitment and a short-term month-to-month agreement for the right or licence to use computer software.

Where the fixed term five-year commitment is chosen the claimant has the option of paying the amount in full at the commencement of the agreement or paying the amount in monthly instalments over the term of the agreement. Since the fixed term five-year commitment (total obligation in relation to what was acquired) fits the description of property of a prescribed class that is a depreciable property (SR&ED property) the expenditures for such a commitment would be SR&ED capital expenditures provided all other requirements outlined in this policy are otherwise met and the property was acquired after December, 15, 2024.

Where a short term non-guaranteed month-to-month agreement to use the same computer software is chosen, usually these agreements allow either party to terminate the agreement by giving the other one month's notice. Under such agreements, the month-to-month payments will normally only benefit the period in which they were made and will not benefit future periods. Therefore, each expenditure is considered to be a current expenditure provided all other requirements concerning the current expenditure are otherwise met. When there is nothing to support, or no reason to believe, that these monthly payments will benefit future periods, there is no basis to capitalize these payments.

Therefore, it is the total of the entire obligation that must be considered, at the time the obligation is made, to determine whether:

• A computer software is a current expense, or
• The software will accrue some benefit for one or more future years

To be considered an amount in respect of depreciable property, it is only necessary to establish that some part of the amount relates to use in a future year.

In an agreement where there is no time guarantee for the use of the software and the payments are on a month to month basis, the monthly payments in question can be considered to be current lease expenditures where it is reasonable to assume that the cost in respect to use in a future year is not being paid up front. Such current expenditures would be included on Form T661 as an SR&ED lease expenditure, if incurred after December 15, 2024.

10.4 Related current costs

If an existing property (for example, equipment) is used temporarily for SR&ED, the costs (for example, maintenance and minor repairs) that would not have been incurred if the SR&ED had not been carried out may be included as a current expenditure in calculating the pool of deductible SR&ED expenditures, when the claimant choose to use the traditional method.

Current expenditures (for example, foreign travel expenditures) for the acquisition of equipment outside Canada that is used in the prosecution of SR&ED in Canada may be included as overhead and other expenditures in the pool of deductible SR&ED expenditures provided all other requirements are otherwise met.

For more information on these types of related current costs, refer to the SR&ED Overhead and Other Expenditures Policy.

11.0 Documentation and other evidence

It is recommended that the claimant keep a list of depreciable property they acquired after December 15, 2024, for the prosecution of SR&ED carried on in Canada to support their claim for SR&ED capital expenditures (see section 3.2). Claimants should be able to provide explanation and supporting evidence of how the capital expenditure was used in the prosecution of SR&ED carried on in Canada. Claimants should be able to provide enough information to establish the intended use of the equipment when it was acquired, as well as its actual use during its useful life.

In capturing capital costs, separate schedules should be maintained for the listing of all major equipment by name, specification, usage, and actual purchase cost in addition to installation costs.

This information should be retained, ready to be provided upon request. For more information concerning documentation and other supporting evidence, refer to Information Circular IC78-10R5, Books and Records Retention / Destruction and Keeping records.

11.1 Examples of documentation and other evidence

Some examples of documentation and other evidence that support SR&ED capital expenditures are:

• Logbooks or other documentation that support the SR&ED use of equipment for the period
• Invoices, purchase contract, cancelled cheques, and planning documents
• Supporting schedules to reconcile capital expenditures on Schedule T2SCH8, Capital Cost Allowance, and Form T661 to the financial statements

For further information on documentation, refer to Appendix 2 of the T4088, Guide to Form T661 Scientific Research and Experimental Development Expenditures (SR&ED) Claim.

Appendix A: Prescribed special-purpose buildings

Prescribed special-purpose buildings are described in the Income Tax Regulations and are approved by the Department of Finance on a building-by-building basis. To date, only one type of building has been prescribed as a special-purpose building. Special-purpose buildings are the only buildings allowed as SR&ED property, if first acquired after December 15, 2024.

Prescribed special-purpose buildings are buildings with working areas designed and constructed to have a displacement in any direction of not more than 0.02 micrometres. In addition, per 0.028 cubic metres of interior airspace there must be fewer than:

• 350 airborne particles of a size less than or equal to 0.1 micrometre in diameter and no airborne particles of a size greater than 0.1 micrometre in diameter
• 75 airborne particles of a size less than or equal to 0.2 micrometre in diameter and no airborne particles of a size greater than 0.2 micrometre in diameter
• 30 airborne particles of a size less than or equal to 0.3 micrometre in diameter and no airborne particles of a size greater than 0.3 micrometre in diameter, or
• 10 airborne particles of a size less than or equal to 0.5 micrometre in diameter and no airborne particles of a size greater than 0.5 micrometre in diameter

Appendix B: Consolidated policy references

Appendix B.1 Legislative references

Appendix B.2 Jurisprudence

Appendix C: Revisions

C.1 Explanation of changes

The following are the explanation of changes to the SR&ED Capital Expenditures Policy as part of the revision of May 22, 2026:

We revised Section 1.0 to explain that capital expenditures for SR&ED made after December 15, 2024, will qualify for SR&ED tax incentives.

Capital expenditures claimants made before December 16, 2024, are ineligible for SR&ED tax incentives.

We updated sections 2 through 8, 10, and 11 to reflect the effective date of the amended legislation.

In Appendix A, we updated it to reflect the effective date of the amended legislation.

In Appendix B.1, we updated the legislative references.

Legislative references have been updated throughout the document and wording throughout the document has been added to indicate that capital expenditures made after December 15, 2024, may qualify for SR&ED tax incentives. Capital expenditures claimants made before December 16, 2024, do not qualify for SR&ED tax incentives.

Other minor formatting and editing corrections were made throughout the document.