CRA Clarifies SR&ED Expansion: Capital Costs, Higher Limits, Public Corp Access

What the CRA confirmed

On October 7, 2026, the Canada Revenue Agency published revised policy guidance on the Scientific Research and Experimental Development (SR&ED) Investment Tax Credit, reflecting amendments enacted in Budget 2025. The guidance clarifies how four major changes will be applied in practice, with effective dates that determine which filed claims can be reopened and amended.

• Capital expenditures are now eligible again for years beginning after December 15, 2024 (previously excluded for expenditures between 2014 and December 15, 2024)
• The enhanced expenditure limit doubles to $6 million, up from $3 million
• Eligible Canadian public corporations—Canadian-listed public corporations not controlled by non-residents—can now access the enhanced 35% investment tax credit (previously limited to Canadian-controlled private corporations)
• Buildings and leasehold interests in buildings remain excluded from capital claims, with third-party building payments allowed only in limited cases

When the expanded rules apply

The effective date test is critical: most expanded rules apply to taxation years that began after December 15, 2024, not years that ended after that date. For a calendar-year filer (year-end December 31), the 2024 tax year is out of scope, while the 2025 and 2026 years are in scope.

Capital expenditures follow a different test. Eligibility depends on when the property itself was acquired and becomes available for use, both after December 15, 2024. This means a calendar-year business can claim capital costs for equipment purchased in March 2025 even though it falls in the 2025 tax year, which began in January 2025.

Businesses with non-calendar year-ends must apply the test to their specific year-end. A June 30 year-end means the year beginning July 1, 2024 does not qualify, while the year beginning July 1, 2025 does.

Phase-out thresholds revised

For the enhanced 35% credit, the phase-out range has been raised significantly. The phase-out now begins at $15 million and ends at $75 million—previously the range was different and narrower.

How this threshold is measured depends on the business type. For Canadian-controlled private corporations (CCPCs) and associated groups, it is measured by taxable capital employed in Canada in the prior tax year. For eligible Canadian public corporations, it is based on average revenue over the previous three fiscal years. Starting in 2024 tax years, CCPCs may elect to use the revenue method instead of the capital method.

Which claims should be reconsidered

Businesses that filed SR&ED claims before the October 2026 policy guidance may have understated their claims under the old rules. The eighteen-month amendment deadline from the end of a taxation year is a hard statutory limit. For calendar-year filers, the 2025 tax year (with an amendment deadline around mid-2027) is the key opportunity to amend under the new rules, if the claim was originally prepared using the old assumptions.

The most common reason claims are understated is not that rules changed, but that eligible work was omitted entirely—failed projects, supporting staff time, contractor costs, or inaccurate time allocation. These issues reach back as far as the reporting deadline allows, independent of the rule-change date.

• Any business that acquired dedicated or shared-use R&D equipment in a year beginning after December 15, 2024
• Larger CCPCs that previously phased out of the enhanced rate under the old $3 million limit and narrower phase-out range
• Eligible Canadian public corporations that never had access to the enhanced rate before
• R&D-intensive manufacturers, processors, and life-science companies where development work is inseparable from equipment costs

What businesses should do next

Businesses should revisit their 2025 and 2026 forecasts and filed positions, starting with capital asset additions. For each asset acquired in an in-scope year, determine what role it played in a development project. Equipment acquired specifically for a project is the clearest case; shared-use equipment requires a defensible allocation basis.

Check taxable capital or revenue against the revised thresholds rather than the ranges used in 2024. Many claims filed after the March 2026 royal assent may have been prepared using pre-change practices, even though the new rules applied. A qualified tax advisor can determine whether a material amendment is available within one or two conversations.