Canada’s SR&ED program underwent its most significant structural update in years through Bill C-15 and subsequent regulatory changes. For companies that have been filing SR&ED claims under the old rules, understanding what changed — and what didn’t — is essential for accurate 2025 planning.
Background: why the changes were made
The federal government has signalled for several years that SR&ED needed modernization. The core concerns were that the program was not keeping pace with the shift toward knowledge-economy and software-driven R&D, that administrative complexity was deterring smaller companies from claiming, and that the credit structure needed to better reflect how innovation actually happens in Canadian companies today.
Key changes under C-15
- Capital expenditure treatment: The previous rules excluded most capital expenditures from SR&ED eligibility. C-15 reintroduced limited capital cost allowance provisions for SR&ED-dedicated equipment and facilities, subject to specific conditions. Companies with significant physical R&D infrastructure should review whether previously excluded capital costs may now be partially eligible.
- Contractor payment rates: The eligible rate for arm’s-length contractor payments has been adjusted. The previous 80% inclusion rate for third-party contractor costs remains the baseline, but new rules around documented scope of work and contractor confirmation of SR&ED activities have been tightened. Contracts without clear SR&ED scope specifications are increasingly at risk of full disallowance.
- Expenditure limit phase-out: The phase-out range for the enhanced 35% CCPC rate has been adjusted. The $10M–$50M taxable capital range that governed the phase-out has been updated — companies near those thresholds should recalculate their expected ITC rate for 2025.
- Documentation standards: CRA has issued updated guidance on contemporaneous documentation standards that accompanied C-15. The guidance formalizes expectations that were previously communicated informally through review decisions, making strong documentation practices more explicitly required.
💡 What did not change: the four-part eligibility test, the fundamental distinction between refundable and non-refundable credits, the 18-month filing deadline, and the core categories of eligible expenditures (salaries, materials, overhead). The program’s structure is intact — the changes are targeted adjustments, not a redesign.
What this means for your 2025 filing
Companies filing SR&ED for fiscal years ending in 2025 should review their claims against the updated rules — particularly around contractor documentation, capital cost eligibility, and the expenditure limit calculation if their taxable capital is in the $10M–$50M range.
For most small and mid-sized CCPCs with straightforward claims, the practical impact of C-15 is limited. The changes matter most for companies with significant contractor spend, physical research infrastructure, or taxable capital approaching the phase-out thresholds.
Getting current advice
Legislative changes in the SR&ED context can be nuanced — the regulatory text and CRA’s administrative positions sometimes diverge from the plain language of the legislation. Before finalizing your 2025 claim, confirm that your SR&ED consultant or tax advisor is working from the updated rules, not prior-year assumptions.
