Manufacturing is one of the strongest-fit sectors for SR&ED, yet many manufacturers assume the program is for labs and software, not shop floors. In practice, process development, materials work, and equipment modification generate some of the most defensible SR&ED claims in the country.
Common Sources of Eligible Work
- Developing a new production process when existing methods can’t reliably achieve the required tolerance, throughput, or quality at scale
- Modifying or combining equipment in ways the manufacturer didn’t design for, requiring systematic testing to determine feasibility
- Formulating or processing materials to meet specifications existing formulations don’t reliably achieve
- Solving unpredictable quality or yield problems that persist despite following documented best practice
What Generally Doesn’t Qualify
- Routine production runs, once a process is established and validated
- Standard equipment installation and commissioning per manufacturer specifications
- Quality control and inspection using established methods
- Cosmetic or minor design variations of existing products
Why Documentation Matters More on the Shop Floor
Manufacturing R&D often happens informally — a shift supervisor adjusting parameters, a technician trying a different tooling setup — and rarely gets written down in a form that reads clearly to a CRA reviewer months later. Production logs, trial run records, scrap and yield data, and engineering change notes are often already being generated; capturing them consistently is usually the biggest gap between a defensible claim and a weak one.
A Note on Capital Expenditures
Following the 2026 SR&ED enhancements, capital expenditures on qualifying equipment are once again eligible for both the deduction and investment tax credit, which meaningfully changes the math for manufacturers investing in new process or testing equipment.
