SR&ED Investment Tax Credit Claim
The SR&ED investment tax credit claim is filed using Form T661, attached to the T2 corporate return. The filing deadline is 18 months after the end of the corporation's fiscal year in which the SR&ED work was performed. This is an absolute deadline: filing after 18 months forfeits the ITC entitlement in full. CRA's review process can take 12-24 months.
Who this applies to
- CCPCs claiming the 35% refundable SR&ED ITC on the first CAD 3 million of qualifying expenditures
- Other Canadian corporations claiming the 15% non-refundable ITC
- Businesses that conducted qualifying basic research, applied research, or experimental development during the fiscal year
- Companies with contract SR&ED work performed by or for them
What to file
Form T661 (Scientific Research and Experimental Development Expenditures Claim) with supporting project descriptions, expenditure details, and ITC calculation. T661 is attached to the T2 return. CRA recommends using the prescribed project description format to reduce the risk of review denial.
How to file
T661 is filed as part of the T2 package via T2 EFILE. An amended T2 with the T661 can be filed within 18 months of year-end if the original T2 did not include the claim. Some claimants engage specialist SR&ED consultants to prepare the technical descriptions and expenditure calculations.
Payment due
Refundable ITC credit is credited or paid (for CCPCs) when CRA processes the T2. CRA may conduct a technical or financial review of the claim before issuing the refund, which can delay receipt by 12-24 months.
Penalties for missing this deadline
The 18-month deadline is absolute with no extensions available. A claim filed 18 months and 1 day after the fiscal year-end is entirely rejected. No partial credit is available for late-filed claims. This is the most consequential deadline in Canadian tax for R&D businesses.
Filing checklist
- Identify all qualifying SR&ED projects conducted during the fiscal year
- Document the technological uncertainty and systematic investigation for each project
- Compile employee time allocations to qualifying SR&ED activities (contemporaneous records required)
- Calculate qualifying expenditures: wages, materials, and overhead (proxy or traditional method)
- Prepare project descriptions on Form T661 (Line 240-260 for each project)
- Calculate the ITC on the T661 claim schedule and attach to the T2 return before the 18-month deadline
Common mistakes to avoid
- Missing the 18-month filing deadline because it was confused with the T2 filing deadline (6 months) - the SR&ED deadline is later but still absolute
- Failing to maintain contemporaneous time tracking and technical documentation - reconstructed records are routinely rejected on CRA review
- Claiming routine software development or engineering work as SR&ED without establishing technological uncertainty
- Not claiming provincial SR&ED credits (many provinces have separate credits that stack on top of the federal ITC)
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