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SR&ED Changes in 2026: What Canadian Companies Need to Know

By Matt | Last reviewed November 7, 2026

There have been more SR&ED changes in 2026 than in any year since the 2014 overhaul. Bill C-15 turned the Budget 2025 enhancements into law in March. The CRA opened a new pre-claim approval process in April and released a redesigned Form T661 in May. Then, on November 5, Budget 2026 proposed extending the program past the experimental development stage for the first time, into regulatory testing and patent costs.

If your company files SR&ED every year, the hard part isn’t learning that things changed. It’s working out which changes affect the claim you’re preparing now, which affect projects you’re planning for next year, and which are still only proposals. This article sorts them into those buckets and ends with what we’d actually do about each one.

It’s written for founders, engineering leaders and finance teams at companies that claim SR&ED, and for the consultants and accountants who work with them.

The 2026 SR&ED changes at a glance

Change	Status	Applies to	Who it matters most to
Enhanced 35% credit limit raised from $3M to $6M	Law (Bill C-15, Royal Assent March 26, 2026)	Tax years beginning after December 15, 2024	CCPCs with more than $3M of qualified SR&ED spending
Taxable-capital phase-out widened to $15M–$75M, plus an optional revenue-based test for CCPCs	Law	Tax years beginning after December 15, 2024	Well-funded and later-stage CCPCs
Enhanced 35% credit opened to eligible Canadian public corporations	Law	Tax years beginning after December 15, 2024	Smaller Canadian listed companies
Capital expenditures and certain equipment lease costs eligible again	Law	Property acquired, or lease costs incurred, after December 15, 2024	Hardware, manufacturing, life sciences and lab-based R&D
Optional pre-claim approval	CRA process, in operation	Launched April 1, 2026	Businesses under $25M of gross business income planning new projects
Redesigned Form T661	In use	Published May 15, 2026	Every claimant
Regulatory testing and certification work	Proposed (Budget 2026)	Tax years beginning on or after November 5, 2026	Companies whose products need approval or certification before sale
Patent and other IP protection costs	Proposed (Budget 2026)	Tax years beginning on or after November 5, 2026	Companies that protect IP created through SR&ED
No more certified board resolutions for certain SR&ED elections	Proposed (Budget 2026)	Elections made on or after Royal Assent	Associated groups and non-arm’s-length arrangements

What didn’t change: the eligibility test

Before getting into the new rules, it’s worth being clear about what stayed the same. None of the 2026 changes alter the basic definition of SR&ED.

Work still has to be a systematic investigation or search, carried out by experiment or analysis, in a field of science or technology. For most companies that means experimental development: trying to achieve a technological advancement where the existing knowledge base isn’t enough to tell you whether, or how, a result can be achieved. Routine engineering, standard debugging, style changes, market research, routine quality testing and commercial production are still excluded.

That matters most for software teams. A project doesn’t qualify because it was hard, or because it was new to your company. It qualifies when there was a genuine technological uncertainty that standard practice couldn’t resolve, and your team worked through it systematically. Budget 2026 widens what can sit around an eligible project. It doesn’t lower the bar for the project itself.

Budget 2026: SR&ED moves toward commercialization (proposed)

The federal budget released on November 5, 2026 proposes the most significant scope change to SR&ED in years. The government’s own description of the program notes that work beyond the experimental development stage is generally excluded. Budget 2026 would carve out two exceptions, with an estimated cost of about $930 million over five years.

Regulatory testing and certification

Under the proposal, eligible activities would include tests, technological validations and studies done to meet regulatory requirements for the initial approval or certification needed to commercialize a product or process. Those activities would have to relate directly to a project that already qualifies under the existing rules.

Two details are easy to miss:

The expense categories don’t change. The new activities would be claimed through the usual buckets: salaries and wages, materials, contracts, overhead, and machinery and equipment.
“Initial” is doing real work in that sentence. As proposed, the measure speaks to the first approval or certification needed to bring something to market. Renewals and ongoing compliance don’t appear to be covered, though we’ll know more once draft legislation and CRA guidance are out.

Here’s how it might play out. A medical device company runs an eligible SR&ED project to develop a new sensing method. Once the experimental work is done, it still has to run validation and safety testing to get the device approved for sale. Under today’s rules, much of that later testing sits outside SR&ED because its purpose is regulatory, not resolving the original technological uncertainty. Under the proposal, the portion that’s required for initial approval and tied directly to the eligible project could be claimed.

The same logic could apply in aerospace, automotive, energy and clean technology, industrial equipment, agri-food and other sectors where products need formal approval or certification before launch. The government has said the CRA will publish sector-specific guidance.

Intellectual property protection costs

Budget 2026 also proposes making certain IP protection costs eligible when the IP was developed in an eligible SR&ED project. According to the budget’s tax annex:

Eligible IP would include patents, certificates of supplementary protection, plant breeders’ rights and copyrighted software, registered in Canada or under equivalent legislation elsewhere.
Eligible costs would generally include preparing and filing an application and the periodic maintenance fees that keep the rights in force.
Excluded costs would include enforcement, such as infringement litigation, and anything not directly connected to obtaining or maintaining protection.
Location matters. Fees paid to a foreign IP office would be eligible, but supporting work such as preparing the application would only count if it’s done in Canada. If your US patents are drafted by a US firm, that drafting work wouldn’t qualify.
There’s a clawback. If you later dispose of IP whose protection costs received SR&ED support, recapture rules would reverse the related deduction and credit.

For software companies, the inclusion of copyrighted software is interesting, but registration costs are usually small. Patents are where the dollars are. And the recapture rule deserves attention from any company that expects to sell or transfer IP in the next few years.

When would it take effect?

The measures would apply to tax years that begin on or after November 5, 2026. Your year-end determines when you’d first see them:

December 31 year-end: first eligible tax year starts January 1, 2027.
November 30 year-end: your next tax year starts December 1, 2026, so you’d be in scope almost immediately.
October 31 year-end: your current tax year started November 1, 2026, four days before Budget Day, so you wouldn’t be in scope until November 1, 2027.

Until legislation passes, treat all of this as proposed. Don’t add these costs to a claim because they were announced in a budget.

A smaller Budget 2026 change worth knowing

Budget 2026 also proposes removing the requirement to file a certified copy of a board resolution or officer authorization with certain elections and agreements, including transfers of qualified SR&ED expenditures and allocations of SR&ED salary or wages. It would apply to elections made on or after the enacting legislation receives Royal Assent. It’s minor, but it removes a step that occasionally holds up group filings.

Pre-claim approval: what the CRA actually asks for

The biggest process change of the year started on April 1, 2026. Pre-claim approval lets an eligible business ask the CRA whether planned work qualifies as SR&ED before it spends significant money on it. If you’ve only just started the work, you can still apply.

To be eligible, your business has to be a CCPC, another Canadian corporation or a partnership, have gross business income under $25 million, and be in good standing with the CRA. The project can’t have been included in a previous SR&ED claim and can’t involve matters under litigation.

The application form is the T1322, submitted through My Business Account, and you can include up to three projects. It’s worth reading the form itself, because it tells you a lot about how the CRA thinks about eligibility. For each project it asks three questions, each with a strict word limit:

What scientific or technological uncertainty are you trying to address? (500 words)
What due diligence have you done to confirm existing knowledge, solutions or approaches can’t resolve it? (700 words) This includes the literature, patents, standards, vendor documentation or experts you consulted, and any trials you’ve already run with existing approaches.
What work will you do over the approval period, up to three years, to overcome it? (900 words) This means your hypotheses and the experiments or analyses you plan to run.

You also have to upload supporting documents. These include project plans, a list of team members and their expertise, the references behind your due diligence, and a description of your planned internal controls: how you’ll track SR&ED work and expenditures, including time tracking and how you’ll keep documentation contemporaneous through the project.

That last requirement is worth pausing on. The CRA is asking you to explain your record-keeping system before the work starts. Companies that already capture time and technical evidence during the year will find that part easy. Companies that rebuild everything after year-end won’t. (We covered what a defensible system looks like in our guide to SR&ED time tracking for engineering teams.)

After you apply, the CRA may set up a meeting with an SR&ED specialist, and the technical contact named on the form should expect to attend. The CRA aims to give its decision within eight weeks of receiving a complete application. An approval can be valid for up to three years. There’s no formal objection process if you’re turned down, but you can still file a regular claim after doing the work.

What approval does and doesn’t do

Approval doesn’t replace the claim. You still file Form T661 after the work is done, report what actually happened and calculate your expenditures. The new T661 has a box to flag that a project received pre-claim approval and a line for the case number. The CRA can still review the claim, and its updated review guide now covers claims selected for review after pre-claim approval. Budget 2025 set a 90-day target, instead of 180, for expenditure reviews of claims with pre-approved projects.

Is it worth applying?

Our view: it’s most useful for first-time claimants, for large projects where eligibility is a genuine question, and where the credit materially affects whether a project gets funded. For a mature software team filing a similar claim for the fifth year, the benefit is smaller. Those teams tend to know where their eligibility lines are, and their project boundaries often shift during the year.

Either way, the T1322 is a useful template. If your team couldn’t answer those three questions about a project today, that’s a sign the year-end narrative will be hard to write too.

The enacted changes: $6M limit, public companies and capital

These are already law, and most apply to tax years beginning after December 15, 2024. For a company with a calendar year-end, that means the 2025 tax year is the first one affected. Many of those claims are being prepared right now. The SR&ED reporting deadline is generally 18 months after year-end, so a December 31, 2025 year-end has until June 30, 2027.

The $6 million expenditure limit

The expenditure limit for the enhanced 35% investment tax credit doubled from $3 million to $6 million. At the full limit, that’s up to $2.1 million of federal credit, before provincial credits and other adjustments. Qualified spending above the limit generally earns the basic 15% credit.

For CCPCs, the limit now phases out as prior-year taxable capital employed in Canada rises from $15 million to $75 million, up from the old $10 million to $50 million range. CCPCs can also elect to use a revenue-based phase-out instead, which tends to suit asset-light companies that have raised significant equity. Associated corporations still share a single limit, and the CRA updated Schedule 49, the allocation agreement, in May.

Eligible Canadian public corporations

The enhanced 35% rate is no longer limited to CCPCs. Eligible Canadian public corporations can now earn it on qualified spending up to the expenditure limit. For them, the limit is reduced as average gross revenue over the previous three years moves from $15 million to $75 million. For a Canadian tech company that went public while still relatively small, this can noticeably change the value of a claim.

Capital expenditures are back

For the first time since 2013, capital spending can be part of an SR&ED claim. Depreciable property acquired after December 15, 2024 can qualify if you expect to use all or substantially all of it (90% or more) for SR&ED in Canada over its useful life, or to consume 90% or more of its value in SR&ED. Equipment used primarily, but not almost entirely, for SR&ED may earn a partial credit under the shared-use equipment rules. Lease costs for qualifying equipment incurred after December 15, 2024 are eligible too.

Some limits still apply. Buildings and land don’t qualify, used equipment doesn’t earn the investment tax credit, and selling SR&ED property or converting it to commercial use can trigger recapture.

This matters most for companies doing physical R&D: specialized test rigs, prototyping equipment, lab instruments. Pure software companies will see less from it. But if you bought significant R&D equipment in 2025 and your claim process ignores capital because it was irrelevant for a decade, it’s worth a second look.

Form T661 and CRA guidance were updated

The CRA published a revised Form T661 on May 15, 2026. The new lines include:

Line 207: a field-of-research code for each project, from Statistics Canada’s research classification.
Lines 212 and 214: a box to tick if the project received pre-claim approval, and the case number.
Lines 262 and 263: the most expensive SR&ED properties used in each project and their SR&ED operating time.
Lines 350 and 355: equipment lease costs.
Line 390: capital expenditures for property acquired after December 15, 2024.
Parts 6B and 6C: capital expenditures and shared-use equipment.

The T4088 guide to the form is still being revised. In the meantime, the CRA has posted interim instructions for the new lines on its SR&ED news page. The CRA also updated related policies over the year, including the Total Qualified Expenditure and Shared-Use-Equipment policies (May), Lease Expenditures (June), Capital Expenditures (June) and the Investment Tax Credit policy (October).

The project description itself hasn’t fundamentally changed. You still explain the uncertainty, the work done to address it and the advancement achieved or attempted, with experiments and results described in order. That chronological story is far easier to write from records made during the year than from memory. Our SR&ED claim preparation guide goes through it in more detail.

Behind the scenes, Budget 2025 also told the CRA to use more AI in administering the program, so low-risk claims can avoid unnecessary audits, and to cut unnecessary review steps and information requests. Pre-claim approval is the most visible result so far. None of it means reviews are going away. The CRA can still review both whether your work is eligible and whether your expenditures are allowable.

What to do now

If you’re preparing a 2025 claim:

Recalculate the enhanced credit against the $6 million limit and the new phase-out ranges, including the revenue-based election if you’re a CCPC.
Allocate the limit across associated companies on the updated Schedule 49.
Find equipment acquired, and lease costs incurred, after December 15, 2024 that may qualify.
Use the current version of Form T661 and the CRA’s interim line-by-line instructions.

If you’re planning a new, technically uncertain project for 2027:

Check whether you meet the pre-claim approval criteria.
Try drafting answers to the three T1322 questions, even if you don’t apply. It’s a quick test of whether the project is really SR&ED.
Put time tracking and documentation in place before the work starts, not after.

If you work in a regulated industry or file patents:

Work out when your first tax year beginning on or after November 5, 2026 starts.
Start tagging regulatory testing and IP costs by project now, so you can separate them later if the measures become law.
Check where your patent applications are drafted, since only work done in Canada would count.
Don’t claim any of it until legislation passes and the CRA publishes guidance.

If your SR&ED process still happens once a year: This year is a good reason to change that. Pre-claim approval asks for your internal controls up front. The new T661 asks for more detail on capital and equipment use. And Budget 2026 would add regulatory and IP costs that need to be traced back to specific projects. Each of these is easier when evidence is captured while the work is happening.

Where ActiveSRED fits

ActiveSRED is in development and has opened an early-access group for Canadian companies, SR&ED consultants and accounting firms. It’s built around a simple observation: the best starting point for an SR&ED claim is the work record your team already creates in issue trackers, source control, calendars and documents.

ActiveSRED connects that trail, proposes employee-level SR&ED hours and project context, and asks each contributor to review, correct and confirm their record. Where the records leave gaps, a planned agentic consultant will ask the engineers or managers who were there focused follow-up questions. The claim owner then reviews the consolidated draft before anything moves forward. ActiveSRED doesn’t decide eligibility or replace professional judgment. Its job is to reduce year-end reconstruction and keep the evidence close to the numbers it supports.

That’s also what the 2026 changes reward: being able to show, during the project and afterward, what you were trying to solve, who did the work, what they learned and what records support it. Companies can use it to prepare their own claims. Consultants can use it to standardize evidence collection across clients.

Interested in trying it with your team? Join ActiveSRED early access

Frequently asked questions

What are the main SR&ED changes in 2026?

Bill C-15 became law on March 26, 2026. It doubled the expenditure limit for the enhanced 35% credit to $6 million, widened the phase-out thresholds, extended the enhanced rate to eligible Canadian public corporations and restored capital expenditures. The CRA launched pre-claim approval on April 1, 2026 and released a redesigned Form T661 on May 15, 2026. Budget 2026, released November 5, 2026, proposes adding certain regulatory testing and IP protection costs.

Are the Budget 2026 SR&ED changes law yet?

No. As of November 7, 2026, the Budget 2026 measures are proposals. They would apply to tax years beginning on or after November 5, 2026, but only once legislation is enacted. The CRA has also said it will publish sector-specific guidance.

Are patent costs eligible for SR&ED now?

Not yet. Budget 2026 proposes making costs to file and maintain patents, and certain other IP protection, eligible when the IP came out of an eligible SR&ED project. Enforcement and litigation costs would be excluded, and recapture would apply if the IP is later sold.

Who can apply for SR&ED pre-claim approval?

CCPCs, other Canadian corporations and partnerships with gross business income under $25 million that are in good standing with the CRA. The project can’t have been in a previous claim or be under litigation. You apply on Form T1322 through My Business Account, for up to three projects.

How long does pre-claim approval take, and how long does it last?

The CRA aims to give a decision within eight weeks of a complete application. An approval can be valid for up to three years. You still have to file an SR&ED claim after the work is done.

What is the SR&ED expenditure limit in 2026?

The limit for the enhanced 35% credit is $6 million for tax years beginning after December 15, 2024. It’s shared among associated corporations and phases out as taxable capital, or average revenue if you elect or are a public corporation, rises from $15 million to $75 million.

Can I claim SR&ED equipment purchases again?

Yes, for depreciable property acquired after December 15, 2024 that you expect to use all or substantially all for SR&ED in Canada. Partial credits may be available for shared-use equipment, and certain equipment lease costs are eligible too. Buildings are excluded, and recapture can apply if you sell the property or convert it to commercial use.

Sources

Primary government sources reviewed November 7, 2026:

This article provides general information, not tax or legal advice. SR&ED eligibility and expenditure treatment depend on the facts of each claim, Budget 2026 measures may change before becoming law, and CRA guidance can change. Check current CRA guidance and consult a qualified SR&ED adviser where appropriate.