Most SR&ED refunds are lost to a short list of unforced mistakes. Not fraud, not aggressive claiming, just ordinary errors: never filing, claiming too little, forgetting whole cost categories, or writing the claim the wrong way. Here are the common SR&ED claim mistakes I see cost companies real money, and how to avoid each one.
The most common mistakes are assuming you don’t qualify, claiming only the obvious project, forgetting contractor, support and overhead costs, not tracking time, filing numbers that don’t match the narrative, writing the claim around the product, waiting until the deadline, and choosing a fee model that eats the refund. Most of them cost you quietly, by shrinking a claim you never see the full size of.
The most expensive mistake is never filing. Eligible companies skip SR&ED because they believe it is only for labs, only for profitable companies, or not for "ordinary" software, or because one earlier attempt "didn’t work out". None of that is the test. For a qualifying CCPC the enhanced 35% credit is refundable, paid as cash even in a loss year, and a normal development team resolving genuine technical uncertainty qualifies. Nor is the programme a niche: the CRA allowed $4.6 billion in SR&ED investment tax credits on 23,677 claims in 2025-26. A bad first year is not a verdict on the next one either: eligibility is judged on each year’s work, so quietly stopping after one reduced or denied claim is a mistake of its own.
The costs left out most often are the eligible work outside the flagship project, arm’s-length contractors, the support work around the experiment, and the overhead method nobody compared.
Eligible work is usually scattered across the year, not concentrated in one flagship project. Claiming only the obvious one misses the hard integration, the performance fix, and the uncertain slice buried in a project you didn’t think of as R&D. Software teams are especially prone to this: agile work is spread across sprints, tickets and commits and never written up as research. Eligibility does not depend on success either: the abandoned approach and the optimization that never shipped count if the uncertainty was real. Fix it by reviewing your whole year for eligible work, failures included.
Salaries get claimed and the rest gets forgotten. Canadian arm’s-length contractors are claimable at 80% of the eligible amount, and support work tied to the experiment qualifies too: a test harness or the data tooling built only to run the experiment counts when it is tied to the eligible work. Contractor claims need paperwork: a contract that names the SR&ED scope, invoices, proof of payment, and the SR&ED portion identified. Leaving these out is one of the biggest sources of under-claiming.
Overhead is claimed one of two ways: the prescribed-proxy amount, which is 55% of eligible salaries, or your actual overhead costs. The election holds for the year, and many claimants take the proxy by default without checking. Fix it by calculating both and taking the higher.
Weak records shrink a claim in two ways: untraceable time gets estimated low, and financial figures that disagree with the technical story invite a review that trims the credit.
Without a way to trace who worked on the eligible work and roughly how much, you end up guessing, and cautious guesses run low. Salary claims backed only by year-end estimates may also be rejected; real-time logs are far more defensible. Fix it by labelling R&D tickets and projects during the year so time can be allocated with confidence.
When the technical narrative says one thing and the financial schedules say another, the mismatch is a leading trigger for a review and a reduction. Hours must trace to payroll, contractor costs to signed agreements and invoices, and materials to consumption records. Note any grants or other government funding tied to the same projects; failing to disclose it inflates the claim. Reconcile the numbers and the story before filing, and if the CRA sends a notice afterwards, respond promptly; ignoring it makes everything worse.
It fails because the CRA judges the work, not the product.
A claim framed around what the product does doesn’t establish the technological uncertainty, systematic investigation and advancement the CRA needs to see, so it gets reduced. The CRA’s project description guidance asks three questions per project, on lines 242, 244 and 246 of Form T661: what uncertainty you faced, what work you did to resolve it, and what advancement you achieved. Fix it by leading with what you didn’t know and how you investigated it.
Waiting means reconstructing a year from memory, and it risks a deadline the CRA very rarely extends.
A late start also risks bumping into the 18-month filing deadline, and the CRA very rarely accepts late claims. The deadline is concrete: a December 31, 2025 year-end has to file by June 30, 2027. Calendar it the day the year ends. If the documentation is not perfect as the date nears, file on time with what you have and amend inside the window, rather than miss it. Capture evidence through the year and file with room to spare.
It does: a percentage fee grows with the refund while the work behind it does not.
A percentage fee quietly takes a bigger slice every year your refund grows, even though the filing work doesn’t scale the same way. Over several years that adds up. Fix it by comparing the lifetime cost of a percentage fee against a flat fee before you commit.
Under-claiming usually costs more than any single filing error. In this example, missing $168,000 of qualifying expenditures costs an eligible CCPC about $58,800 in federal credit. Take a CCPC that claims only its obvious project, capturing $265,000 in salaries, for about $92,750 in federal credit before overhead. The mistakes cost it:
Caught, those lift the base from $265,000 to about $433,000, for roughly $151,550 in federal credit before the prescribed-proxy overhead amount. That’s about $58,800 of federal credit left behind, purely from under-claiming. This is illustrative, so your numbers will vary. For an eligible CCPC the enhanced 35% credit is refundable, applies to the first $6 million of qualifying expenditures for taxation years beginning on or after December 16, 2024 (the limit Bill C-15 raised), provides up to $2.1 million a year, phases out with taxable capital, and shares that limit among associated corporations. Most provinces and territories run their own R&D credit as well, and where one exists it makes your total return larger. How much larger depends on the province. The CRA lists them in its provincial and territorial R&D credits table, and the State of SR&ED overview gives the wider context.
Run this before filing to catch the mistakes that cost the most.
The SR&ED mistakes that cost the most aren’t dramatic. They’re the quiet ones: never filing, claiming too little, forgetting costs, and filing at the last minute. Review your whole year, capture every eligible cost, reconcile the numbers to the story, frame around the uncertainty, and file early, and you avoid nearly all of them. For a second set of eyes on what you might be missing, book a free consultation. The CRA’s SR&ED program page is the official source for the rules.
Related reading: how software development qualifies for SR&ED in Canada, how SR&ED tax services support startup R&D credits, and whether to file SR&ED in house or with a consultant.
For companies that qualify and assume they don’t, it is never filing. For companies that do file, it is under-claiming: reviewing one flagship project and leaving smaller pockets of uncertain work, and the costs attached to them, unclaimed.
Under-claiming, by a wide margin. Most companies are cautious and leave eligible work out rather than risk including something questionable, so the typical mistake costs you refund you were entitled to.
It can. Padding a claim with routine work weakens the whole thing and can invite a closer review that trims the credit. The goal isn’t to claim more than you should, it’s to claim everything you genuinely can and show it well.
Sometimes. If you’re still inside the 18-month window for that year, you may be able to amend or add to the claim. Once the window closes, the year is generally locked, so it’s worth catching mistakes before the deadline.
No. Any corporation carrying on eligible work in Canada can claim. The enhanced refundable 35% rate is for qualifying CCPCs and, from taxation years starting December 16, 2024, for eligible Canadian public corporations. Other corporations earn the basic 15% rate, which is non-refundable for most of them.
Price and quality aren’t the same thing. What matters is whether they review your whole year, write a strong technical narrative, and stand behind the claim. Judge on expertise and what’s included, not just the headline fee.
This article is general information, not tax advice. Tax figures depend on your corporation type, province, and taxation year.
Do you have a SRED question? Planning for the future or perhaps you want to know how much your claim might be? Don’t worry, our CPA is always ready to answer any question. Get a SRED expert in your corner.
Have a question? We’d love to help. If you don’t have a SR&ED expert in your corner, doesn’t it make sense to have one?
