CRA forms
Form T661 Explained: Claiming SR&ED Tax Credits
18 monthsafter the end of the tax year for a corporation to file its SR&ED claim. Miss it and the incentives for those expenditures are lost.
Sources checked October 20263 min read
Key points
- Claims the deduction and investment tax credits for scientific research and experimental development
- Filed with Schedule 31 by a corporation, or Form T2038(IND) by an individual
- Reporting deadline: 18 months after year end for corporations, 17.5 months for individuals
- An enhanced 35% credit for qualifying corporations, on a higher limit of $6 million
What SR&ED is
The scientific research and experimental development program rewards systematic work in Canada to resolve scientific or technological uncertainty: developing a new process, product or material where the outcome could not be known in advance from existing knowledge. It offers two incentives: a deduction for the qualifying expenditures, which form a pool that can be carried forward, and an investment tax credit on them.
Form T661 identifies the work and the expenditures. A corporation files it with Schedule 31, Investment Tax Credit, and an individual with Form T2038(IND). An expenditure that is not identified on Form T661 cannot be treated as an SR&ED expenditure at all.
The deadline that cannot be missed
The SR&ED reporting deadline is 12 months after the filing due date of the return for the year. For a corporation that is 18 months after the end of the tax year; for an individual, about 17.5 months. An expenditure not reported on Form T661 by then loses the incentives for that expenditure.
A corporation that is exempt from tax and incurs SR&ED expenditures has a shorter deadline: the T661 is due with its return, six months after the year end, or a penalty applies.
The credit rates
A Canadian controlled private corporation can earn an enhanced 35% investment tax credit, refundable, on qualifying expenditures up to an annual limit that has been raised from $3 million to $6 million. Expenditures above the limit, and claims by other corporations, generally earn the basic 15% credit, which for most other corporations is not refundable. Provinces add credits of their own.
What the form asks
Part 2 carries most of the weight in a review. It describes each project, the uncertainty, the work done and the advances sought, within word limits, so it has to be written from records kept while the work happened.
| Part | What it covers |
|---|---|
| Part 1 | General information about the claimant |
| Part 2 | Project information: the uncertainty, the work and the advances sought |
| Parts 3 and 4 | SR&ED expenditures, and the qualified expenditures for the credit |
| Part 5 | The prescribed proxy amount, for claimants using the proxy method for overhead |
| Part 6 | Project costs |
| Parts 7 and 8 | Additional information and the claim checklist |
| Part 9 | Claim preparer information; incomplete details draw a $1,000 penalty |
Quick answers
When is an SR&ED claim due for a corporation?
Within 18 months of the end of the tax year: 12 months after the T2 filing due date.
What happens if the SR&ED deadline is missed?
The expenditures not reported on Form T661 by the deadline do not qualify for the SR&ED incentives.
Which forms make up an SR&ED claim?
Form T661 plus Schedule 31 for a corporation, or Form T2038(IND) for an individual, filed with the return for the year.
Related pages
Official sources
Call or email and we will tell you which records we need and what the work costs, in writing, before anything starts.
Important. This article provides general educational information, not legal or tax advice for a specific business. Rules, administrative policies, rates and deadlines can change. Confirm your facts and current obligations with the responsible government agency and a qualified adviser.