Reviewed by Logan Hanson, BSc, CPA. Last verified against CRA guidance on August 4, 2026.
When founders under-claim SR&ED, it’s rarely because they missed a whole project. It’s because they claimed the obvious salaries and stopped, leaving contractors, support work, partial time and overhead on the table. That’s where SR&ED consulting earns its keep: not in the writing, but in the finding. Here’s exactly which eligible R&D costs get missed, why, and how a proper review pulls them back in.
SR&ED consulting finds more eligible costs by reviewing every cost category against every project, instead of just the salaries on the one project you thought of. Most under-claims aren’t a judgment call gone wrong. They’re costs nobody looked for. A structured review checks each type of eligible expenditure, ties it to the eligible work, and makes sure the time allocations are right.
The four that get left out most are contractors, support work, partial-time salaries, and overhead. Each one is straightforward once you know to look for it.
Arm’s-length Canadian contractors are claimable at 80% of the eligible amount, where the work is done in Canada on your behalf by a taxable supplier. Founders who outsourced part of the hard technical work often forget it counts, or assume only employees qualify. It’s a commonly missed line, and often a big one.
Work that isn’t the experiment itself but directly enabled it can qualify as support work. Building the test harness to run your trials, or the data tooling that only existed to let you experiment, is claimable when it’s tied to the eligible work. On its own it wouldn’t count, which is exactly why founders leave it out.
You don’t need someone on R&D full time to claim them. You claim the eligible portion of their time. The developer who spent 30% of the year on the uncertain work, the lead who supervised it, the person who split time across features and experiments: their eligible share counts, and it adds up fast across a team.
Overhead can be claimed directly or through the prescribed-proxy amount, a set percentage of your eligible salaries (currently 55%). For most software teams the proxy is simpler than tracking actual overhead. Compare both methods and take whichever is higher; skipping the comparison quietly shrinks the claim.
Mostly because they think in projects and headline salaries, not in cost categories. The instinct is to point at the big R&D project and claim the developers on it. That misses the contractor who did a chunk of it, the QA engineer who built the experiment harness, the founder who spent evenings on the uncertain part, and the overhead that rides on all of it. None of it is exotic. It just isn’t top of mind when you’re running a company.
Missed cost categories can easily double a modest claim. Take a CCPC that self-identified $150,000 in obvious developer salaries, for about $52,000 in federal credit before overhead and provincial credits. A full cost review adds:
That takes the qualifying base from $150,000 to about $250,000, for roughly $87,000 in federal credit before the prescribed-proxy overhead amount and provincial credits, which push it higher again. Same work, same year. The extra credit came from cost categories the founder didn’t think to include. This is illustrative, so your numbers will vary. See our State of SR&ED overview for the wider picture.
For a qualifying CCPC, that 35% federal credit is refundable and paid as cash even in a loss year. The 35% rate applies to the first $6 million of qualifying spend, up to $2.1 million a year, and phases out with taxable capital. With provincial credits, the combined return is higher than the federal credit alone, though not by simple addition, and how much higher depends on your province.
Before you file, walk your year against every cost category, not just salaries. Check each of these:
SRED.ca charges a flat fee, billed monthly, never a percentage or contingency fee, which usually works out to roughly half the lifetime cost of a percentage-based firm. That matters here: a percentage firm takes a cut of every extra cost it finds, while our fee stays the same whether your claim is small or large. As far as we know, we’re the only SR&ED provider that publishes its pricing on its website. We track eligible work year-round, we’re CPA-owned, audit defense is included, and if the CRA approves less than 75% of the filed claim we waive our fees, as set out in our 75% guarantee. If there’s no eligible work in your year, you don’t pay.
A missed eligible dollar is still a missed eligible dollar. Contractors, support work, partial time and overhead are where most under-claims live, and finding them is ordinary, careful work rather than anything clever. If you want a review that checks every cost category in your year, grab a free consultation. The CRA’s SR&ED program page lists what’s claimable.
Related reading: how SR&ED tax services support startup R&D credits, why tech firms struggle with SR&ED claims, and why an SR&ED refund shrinks under a previous consultant.
Contractor costs, support and enabling work, partial-time salaries, and overhead. Founders tend to claim the obvious full-time developers on the main project and stop, which leaves several eligible cost categories unclaimed.
Yes. You claim the eligible portion of their time spent on the qualifying work. Someone doesn’t need to be on R&D full time to be claimable, which is why partial-time contributions across a team add up to real money.
Yes. Arm’s-length Canadian contractors are claimable at 80% of the eligible amount when the work is done in Canada on your behalf by a taxable supplier, and the work meets the same eligibility tests as in-house work.
It’s a simplified way to claim overhead: instead of tracking actual overhead costs, you apply a set percentage, currently 55%, to your eligible salaries. For many software teams it avoids tracking each overhead expense, but a good process compares it with the actual-cost method and takes the higher one.
You can claim the portion of their time spent directly performing, supporting or supervising the eligible work. General management and administration don’t qualify, but hands-on technical supervision of the experimental work does, for the eligible share of their time.
Generally not as materials, since ongoing cloud and subscription costs aren’t consumed or transformed in the work. Overhead of that kind is usually captured through the prescribed-proxy amount rather than claimed line by line. If you use the actual-cost method for overhead, the treatment can differ, so it’s worth confirming for your situation.
This article is general information, not tax advice. Tax figures depend on your corporation type, province, and taxation year.
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