SR&ED Opportunities for Engineering Firms

Engineering firm projects often appear routine: clients present requirements and teams deliver solutions within their established expertise. But what separates standard work from SR&ED eligible innovation? The answer lies in uncertainty—where projects address a hypothesis, push boundaries or seek to create improved technical solutions.

Thankfully SR&ED doesn’t require revolutionary new technology. It’s all about incremental improvements. Therefore, smaller, overlooked activities—if approached strategically—can qualify. Here’s how to spot them.

Beyond Routine Data Collection: Turning Fieldwork into R&D

Field data collection can feel like standard practice, but it can transform into SR&ED with minor changes to your approach:

• Developing a Hypothesis: Instead of merely gathering data, frame a specific technical question. By forming a hypothesis, the data collection becomes an experiment. Each site provides a unique data set to address your hypothesis. Conduct analysis and you've completed the systematic investigation.

• Beyond-scope activity: Add extra monitoring points or tests that align with your hypothesis on top of client requirements. The CRA requires that the work goes beyond paid client deliverables.

  
  

Example: A firm conducting contaminant monitoring at multiple sites notices inconsistent migration patterns. By designing a supplemental study (e.g., testing deeper soil layers or expanding sensor placements) and analyzing the results, they resolve a technological uncertainty—qualifying the work for SR&ED.

Simulations as Experimental Trials

Physical prototypes aren’t always feasible (e.g., bridges, high-risk environments), but computational iterations can serve as SR&ED eligible trials if:

• The design faces constraints that eliminate standard solutions (e.g., extreme loads, novel materials, or challenging site conditions).

• Simulations are used to test the design iterations aimed at overcoming those constraints.

  
  

Example: A structural engineering team iterates 20+ finite-element models to solve vibration issues in a seismically active zone. Each iteration provides insights that lead to a novel solution, demonstrating systematic experimentation.

Pushing the Limits of New Technologies

Adopting a new tool or method? SR&ED eligibility hinges on extending its capabilities beyond the existing applications, for example

• Unproven implementation: Using a drone-based LiDAR system to map underwater topography where its typical use is land-based.

• Environmental challenges: Deploying sensors in extreme cold where performance data is lacking and there is reason to believe the performance will be degraded.

  
  

Documenting the technology’s baseline capabilities (ex. communications with suppliers, publications) will strengthen your claim.

Maximizing Claims: Small Projects, Big Impact

Don’t dismiss minor activities! SR&ED allows project grouping around technological themes (e.g., similar data collection at multiple sites). This can improve the strength and content of the SR&ED project while increasing the size of the claim.  

Actionable Steps:

1. Review projects for technical challenges or recurring data themes.

2. Ask: Did we deviate from standard practice to solve a problem?

3. Document your ideas, analysis and project plans.

   
   

SR&ED isn’t just about tax credits—it’s an opportunity to pursue innovative solutions that enhance your firm’s expertise.