SR&ED changes in 2026 raise the enhanced limit to $6M

The Scientific Research and Experimental Development (SR&ED) program is Canada's largest federal support for business R&D. On March 26, 2026, Bill C-15 received Royal Assent and put the SR&ED changes from the 2024 Fall Economic Statement and Budget 2025 into law. For Canadian-controlled private corporations (CCPCs), the changes roughly double the refundable credit available each year.

SR&ED expenditure limit doubles to $6 million

CCPCs can earn an enhanced 35% investment tax credit on qualified SR&ED spending up to an annual expenditure limit. The Canada Revenue Agency (CRA) confirms the limit has increased from $3 million to $6 million for tax years beginning after December 15, 2024. PwC notes this allows a qualifying CCPC to claim up to $2.1 million in refundable credits a year.

The limit phases out with size. The CRA states that the reduction now begins at $15 million of prior-year taxable capital employed in Canada and reaches zero at $75 million. A CCPC can elect instead to use a gross revenue test based on its average revenue over the three preceding years.

How the limit reached $6 million

The 2024 Fall Economic Statement first proposed raising the limit from $3 million to $4.5 million. PwC notes that Budget 2025, tabled on November 4, 2025, raised the proposal again to $6 million, effective for the same tax years. Bill C-15 then made both steps law. Companies that filed for tax years beginning after December 15, 2024 under the old limit should check whether they can claim more.

Capital expenditures are eligible again

Capital spending was removed from SR&ED in 2014. The CRA confirms that eligible capital expenditures made after December 15, 2024 can now be claimed. For leases, PwC notes the rule applies to amounts first payable after that date.

Refundability differs by type of spending. PwC's summary of the rules shows that a qualifying CCPC receives a refund of 100% of the enhanced credit on current expenditures and 40% of the enhanced credit on capital expenditures. Credits earned at the basic 15% rate are refundable at 40%.

Eligible Canadian public corporations

The enhanced 35% rate now extends to certain eligible Canadian public corporations (ECPCs). Their expenditure limit phases out based on average gross revenue between $15 million and $75 million. This matters for startups planning an IPO, because the enhanced rate no longer ends automatically at listing.

Effect on a startup's runway

For a pre-revenue CCPC, refundable credits arrive as cash after the tax return is assessed. The higher limit means a company with a larger engineering team can now recover more of its R&D payroll. The return of capital expenditures helps hardware, robotics and lab-based startups that buy equipment.

Founder takeaways

• Keep contemporaneous records. Log hypotheses, experiments and results as work happens, not at year end.
• Track time by project. Payroll is usually the largest eligible cost, and the CRA expects support for it.
• Separate capital from current spending. They are refunded at different rates.
• Watch your taxable capital. A large equity raise can push you into the phase-out range in the following year.
• Review prior-year filings. The rules apply to tax years beginning after December 15, 2024.

SR&ED rules are technical. The CRA publishes detailed policies, and most startups use an accountant or specialist to prepare claims. PacTech's Financing 101 module covers how SR&ED fits alongside grants, loans and equity.

This article is general information, not legal or financial advice. Speak with a qualified Canadian lawyer or accountant about your situation.

General information. This article is general information, not legal, tax or financial advice. Confirm the details with a qualified professional before you act.

Sources

1. SR&ED news and updates
   Canada Revenue Agency
2. Tax Insights: SR&ED updates
   PwC Canada · Nov 10, 2025