Experimental Development accounts for over 95% of all SR&ED claims submitted by businesses.
Based on the definition of experimental development in the law, the following principles have been identified as key considerations in the recognition of Experimental Development:
Experimental Development is the attempt to achieve technological advancement for the purpose of creating new, or improving existing, materials, devices, products or processes, including incremental improvements.
In Experimental Development, the objective is the achievement of technological advancement, whereas in Basic and Applied Research the objective is the advancement of scientific knowledge. In either case, there is no requirement that the attempt be successful.
Experimental Development is typically carried out in a commercial setting.
The technological advancement can be either embodied in the new or improved materials, devices, products or processes, or represented by the technological know-how gained.
An attempt to resolve technological uncertainty is an attempt to achieve technological advancement.
The technological advancement sought must be identified within the business context of the taxpayer. For example, developing specific functionality/capability could represent a technological advancement to a small company (that has limited access to engineering/technical resources), or it could be more routine engineering in nature to a large company (that has much greater resources, expertise and experience).
Work with respect to engineering, design, operations research, mathematical analysis, computer programming, data collection, testing and psychological research is included as experimental development if it is "directly in support" of and "commensurate with the needs" of the experimental development being undertaken.
Work that directly contributes to the attempt to achieve a technological advancement is Experimental Development regardless of what the work is called
Typically, product and process innovations have characteristics that include:
A new or improved capability of a machine, equipment, or process, which demonstrates technological advancement;
It is a technologically based advancement that could have applications for other product lines (i.e., the development applies to a range of products or processes);
The initial market-driven specification could not be attained by claimants in their business context, and a technological barrier was identified before the development effort started.
Major types of technology within various industrial sectors that are often associated with eligible SR&ED activities includes, but is not limited to such areas as:
Mechanical engineering or mechanical design;
Materials capability enhancement or substitution (using unconventional materials to meet increased mechanical demands or reduce cost, weight, etc.);
Electrical and electronics engineering, and electrical and electronics design; and