The programs at a glance
Scientific Research & Experimental Development
Industrial Research Assistance Program
The most important difference: when the money arrives
SR&ED is a tax credit. You spend money on R&D, file a claim with your T2 at year-end, and CRA processes a refund — typically several months after the fiscal year closes. For a December 31 year-end, that's often a cheque arriving mid-to-late the following year. The cash lag between spending and receiving can be 12–18 months.
IRAP reimburses monthly. You pay your team, submit timesheets, and receive reimbursement on a 30–60 day cycle throughout the year. For a startup managing runway, this timing difference is significant — IRAP functions more like ongoing cost-sharing than a year-end windfall.
What costs each program covers
| Cost category | SR&ED | IRAP |
|---|---|---|
| Canadian employee salaries (R&D) | Yes — 35% credit | Yes — up to 75% grant |
| Canadian contractor fees | Yes — 80% eligible | Yes — up to 50% grant |
| Non-Canadian contractors | Not eligible | Not eligible |
| Cloud / GPU compute costs | Via overhead proxy | Not directly covered |
| Capital equipment (post Dec 2024) | Yes — restored by C-15 | Not directly covered |
| Materials consumed in R&D | Yes | Sometimes — check with ITA |
| Overhead (rent, utilities) | Via 55% proxy method | Not eligible |
SR&ED has broader cost coverage — it captures overhead and compute through the proxy method, and after Bill C-15 it covers capital equipment again. IRAP is narrower, focused primarily on labour, but it pays a higher rate on that labour (up to 75% vs SR&ED's 35%) and pays it faster.
Eligibility: where they differ
Both programs require genuine technological uncertainty — work where the outcome isn't known in advance and systematic investigation is underway. Routine software development, standard engineering, and API integrations without novel technical challenge don't qualify for either.
Beyond that, the requirements diverge:
- SR&ED has no size limit, no employee cap, and no relationship requirement. Any incorporated Canadian company can file. There's no approval before you spend — you simply document your R&D as you go and file at year-end.
- IRAP requires under 500 employees and an active ITA relationship. The work must be in progress — completed projects don't qualify. You also need a credible Canadian commercialization plan, and the project must not have started before ITA engagement.
Can you claim both?
Yes — and for most qualifying companies, you should. The programs cover different cost buckets on the same project, which makes simultaneous claiming entirely legal. IRAP's grant covers a defined portion of your eligible labour. SR&ED then applies its 35% credit to the eligible R&D spend that IRAP didn't cover. No dollar gets counted twice.
The combination also covers more of your total R&D spend than either program alone. IRAP at 75% on its portion plus SR&ED at 35% on the remainder means a higher blended recovery rate than either program would produce independently. Ontario's 8% OITC stacks on top of the SR&ED portion at no additional effort.
When one might make more sense than the other
There are situations where one program is a better fit to pursue first, or where one doesn't apply:
- Work is already completed: Only SR&ED applies. IRAP requires engagement before the project starts.
- Over 500 employees: IRAP's size limit applies. SR&ED has no cap.
- Cash flow is critical now: IRAP's monthly reimbursement cycle is more valuable than SR&ED's year-end credit if runway is tight.
- Overhead and compute are a large share of R&D spend: SR&ED's proxy method captures these; IRAP doesn't. SR&ED alone may produce more value if labour is a smaller portion of costs.
- No ITA relationship yet and project is starting soon: SR&ED is available immediately. Pursue IRAP in parallel for the next project.