SR&ED v. IRAP: What works for the business?

Two key pillars of Canadian government funding support for research and development (R&D) initiatives are the  National Research Council of Canada Industrial Research Assistance Program (NRC IRAP) and the Scientific Research and Experimental Development (SR&ED) program. For Canadian businesses engaged in R&D activities, understanding the distinctive advantages of each program is important.

	IRAP	SR&ED
Mechanism	Grant - non-repayable funding for a beneficial project, received before and during the project to cover expenses	Tax credit - awarded to reduce income tax paid by the business, applicable at the time of tax filing
Objective	Accelerate R&D projects	Retroactive tax credits provided four (4) to twelve (12) months after approval for research projects
Funding contribution	Up to 80% of internal technical labor and subcontractor expenses with no maximum funding limit	Covers up to 69% of labor and overhead costs, 36% of contractor costs, and 45% of material costs with no predefined funding limit
Distribution	Approved applicants receive funding throughout the project	Tax credits applied during the annual tax filing
Eligibility	Technical R&D projects with a level of technical uncertainty	Answering standard questions related to scientific or technological uncertainty, hypothesis formulation, systematic investigation, advancement achievement, and record keeping (see Guidelines, and National R&D Inc. v. Canada, 2022 FCA 72)
Timeline	Projects conducted between April 1 and March 31, with potential durations exceeding 12 months for larger projects	Tax reimbursement provided relatively quickly after filing but may take up to twelve (12) months for certain applications

Stacking programs: A cautionary tale

While it is possible to stack IRAP and SR&ED funding, applicants must decide which expenses to include in each program based on project stages. Nor must it be forgotten that, in the case of IRAP funding, the applicant must be pre-approved (i.e., before the project commences) before spending.  The decision to apply for these programs depends on project eligibility and financial considerations.

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