Evolution | The CRA Framework
The Streamlined Test
The Evolution of the Eligibility Test For nearly a decade, the Canada Revenue Agency (CRA) evaluated SR&ED claims using a rigid, five-question test that scrutinized everything from technological uncertainty to the scientific method. This framework was the cornerstone of SR&ED compliance. Recently, however, the CRA replaced this complex criteria with simplified language designed to make the program more accessible. The eligibility test has now been distilled into a streamlined, two-part framework: the "Why" requirement and the "How" requirement.
Criteria | Scientific Advancement
Defining the "Why"
The "Why" requirement focuses strictly on the intent behind your R&D. To qualify, the work must have been conducted explicitly for the advancement of scientific knowledge or the achievement of a technological advancement. Crucially, the fundamental catalyst remains unchanged: identifying and attempting to overcome a genuine scientific or technological uncertainty is still the absolute starting point for satisfying the "Why" requirement. If the purpose was merely commercial gain using standard engineering practices, it fails this test.
Methodology | Systematic Investigation
Executing the "How"
The "How" requirement evaluates your methodology. Did you adopt a systematic investigation or search? The CRA requires proof that your path involved structured experimental development, basic research, or applied research, along with eligible support work (like data collection or specific programming). You cannot simply use trial-and-error. Your work must follow a disciplined, logical progression from hypothesis to conclusion.
Legislation | Core Standards
Simplified Language, Unchanged Law
Simplified Language, Unchanged Law It is vital for claimants to understand that while the CRA’s language has been simplified, the actual legislation which defines SR&ED under subsection 248(1) of the Income Tax Act has not changed. For veteran claimants transitioning to the new framework, the mapping is straightforward: the "Why" requirement encompasses the old questions regarding Uncertainty and Advancement (Questions 1 and 4), while the "How" requirement covers the Formulation of Hypotheses, the Scientific Method, and Record-Keeping (Questions 2, 3, and 5). The bar for eligibility remains as high as ever with only the terminology changing.
