Reviewed by Logan Hanson, BSc, CPA. Last verified against CRA guidance on August 4, 2026.
When an SR&ED claim fails, it’s usually not because the work wasn’t real. It’s because the claim didn’t show the CRA what it needed to see, or it ran into a hard rule like the filing deadline. The good news: almost every failure I’ve seen traces back to a handful of causes, and each one is avoidable. Here’s what actually causes SR&ED claims to be reduced or denied in Canada, and how to keep yours off that list.
SR&ED claims fail for one of two reasons: the claim doesn’t demonstrate eligible work to the CRA’s standard, or it breaks a procedural rule like the filing deadline. The eligible work can be completely genuine and the claim can still fail if it isn’t shown properly. Here are the specific causes.
A claim fails here when it doesn’t clearly establish that the outcome was uncertain to a competent professional using standard practice. The work then reads as routine, however hard it was. Difficulty is not uncertainty, and the CRA is testing for uncertainty.
A narrative built around what the product does, rather than what was technically unknown, gives the reviewer nothing to approve. This is where good work gets denied. The claim has to be framed around the uncertainty and the systematic investigation, in the CRA’s terms.
If the claim can’t be backed by contemporaneous records, it gets shaky under review. A narrative with no commits, tickets, benchmarks or notes behind it is hard to defend, and reviewers tend to reduce what can’t be supported.
When the dollars don’t match the technical story, the whole claim loses credibility. Contractor costs with no matching work, or time allocations that don’t add up, invite the reviewer to trim the numbers. The costing has to line up with the narrative and your records.
For corporations, SR&ED must be filed within 18 months of fiscal year-end. Miss it and the claim generally fails outright, no matter how strong the work was. The CRA very rarely accepts late claims, which makes this the one cause with no fix after the fact.
A weak claim is often reduced rather than denied outright. The CRA reviews it, questions the parts it can’t accept, and adjusts the credit down to what the claim can support. A full denial usually means the work didn’t meet the eligibility tests at all, or the claim was filed too late. Either way, the practical result is the same: you get less than the work was actually worth.
A failure usually shows up as a reduction, not a zero. Take a CCPC that filed a $580,000 qualifying base, worth roughly $203,000 in federal credit before overhead and provincial credits. Under review, the narrative described the product rather than the uncertainty, and a chunk of the work couldn’t be backed by evidence.
The CRA accepts only the portion that was clearly shown, cutting the supported base to about $300,000, or roughly $105,000 in federal credit. That’s nearly $98,000 of credit lost, on work that may well have been eligible, because the claim didn’t demonstrate it. This is illustrative, so outcomes vary. For an eligible CCPC, the enhanced refundable federal rate is 35% on up to the first $6 million of qualifying expenditures, up to $2.1 million a year, and that limit phases out with taxable capital and is shared among associated corporations. Our State of SR&ED overview has the wider context.
A defensible SR&ED claim identifies a technological uncertainty, documents systematic investigation and advancement, reconciles every cost, and meets the filing deadline. Check yours against each failure point before you file.
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. As far as we know, we’re the only SR&ED provider that publishes its pricing on its website. We build claims to clear these failure points from the start: framing around uncertainty, backing it with evidence tracked year-round, and reconciling the costs. 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.
SR&ED claims rarely fail because the R&D wasn’t real. They fail because the claim didn’t show it, or missed the deadline. Frame around the uncertainty, back it with evidence, reconcile the costs, and file on time, and you close off nearly every cause of failure. If you want a second set of eyes before you file, grab a free consultation. The CRA’s SR&ED program page sets out what a claim has to establish.
Related reading: why tech firms struggle with SR&ED claims, why an SR&ED refund shrinks under a previous consultant, and how to fix SR&ED claim delays.
SR&ED claims most often fail because they don’t establish the three eligibility elements together: technological uncertainty, systematic investigation, and technological advancement.
Failing to show technological uncertainty. If the claim doesn’t establish that the outcome was genuinely uncertain to a competent professional, the work reads as routine and the credit gets reduced or denied, no matter how much effort it took.
Yes. The CRA can accept the supported parts of a claim and reduce the rest, so a weak claim typically costs you a portion of the refund rather than all of it.
An SR&ED review is generally focused on the SR&ED claim itself, not a full audit of your company. That said, keeping clean records and a defensible claim is the best way to keep a review narrow and straightforward.
You can provide more support during the review, and there are formal channels to dispute an assessment you disagree with. Both are far easier when you have contemporaneous evidence behind the claim, which is why building it well up front matters so much.
Yes. For corporations, the deadline is 18 months after fiscal year-end, and the CRA very rarely accepts late claims. Missing it usually means the whole claim fails, regardless of how strong the underlying work was.
No one can guarantee a CRA outcome, and you should be wary of anyone who claims to. What a good consultant does is close off the common causes of failure, framing the work around uncertainty, backing it with evidence, and reconciling the costs, which makes a strong result far more likely.
This article is general information, not tax advice. Tax figures depend on your corporation type, province, and taxation year.
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