IRAP and SR&ED: Innovation Requirements for Research Funding

Canadian Government Funding IRAP and SR&ED Innovation Requirements for Research Funding

When performing research projects that involve technical risk or uncertainty, Canadian innovators should use government funding programs. These offset project costs and reduce risk, making exploratory innovations more achievable for SMEs. To innovate as efficiently as possible, companies should be aware of how incentives such as the Industrial Research Assistance Program (IRAP) and the Scientific Research and Experimental Development (SR&ED) tax credit work.

Although there is a significant amount of information available online that reviews research funding programs, it can be difficult to understand exactly how the programs work. For those who are new to government funding, the process of figuring out what do and when to apply may seem like too much of a burden. Ultimately, the lack of straight-forward resources prevents innovators from accessing research incentives.

Fortunately, Mentor Works’ IRAP vs. SR&ED Guide explores each funding program in a streamlined way. Access it to take a deep dive into each opportunity and see how they stack up.

Aside from basic questions like how much funding your project can access, companies often ask what types of projects qualify for research funding. This article reviews the concepts of “Technical Uncertainty” and “Experimental Development” at greater depth to help uncover whether research grants and incentives are a good fit for your upcoming project.

Research Funding Requirements: Advancing the Available Knowledge Base

The main objective of IRAP and SR&ED funding is to help Canadian innovators perform exploratory research that advances the current technological knowledge base. Ideally, innovators should be confronting issues that will lead to improved features, functionality, or capabilities, for either products or processes.

IRAP and SR&ED both use similar language when referring to the types of projects that are eligible to receive funding. Typically, if your project meets the following definitions, it will be considered a good fit for the programs:

  • Technical Uncertainty or Risk (IRAP): Technical uncertainties exist when innovators view a product- or process-related challenge with an end goal in mind. Typically, this will be an enhanced version of previous technology, and there are roadblocks preventing the transition to its upgraded state. Uncertainties and risks are often resource-driven (either time, talent, or money), and IRAP can help by providing companies with the cash flow necessary to overcome them.
  • Experimental Development (SR&ED): Experimental development is all about undertaking work to achieve technological advancement. It assumes that there is an upper level of knowledge available in a field, and the company seeks to expand on that understanding. Experimental development may or may not have an end goal in mind, which is ideal for SR&ED where companies can claim funding for research costs without having to achieve with tangible results.

While both the Industrial Research Assistance Program (IRAP) and the Scientific Research and Experimental Development (SR&ED) tax credit provide funding for innovative research, their focus is slightly different. Experimental development projects can also maintain technical uncertainties and risks, but will not have the same commercialization focus of projects well-suited for IRAP.

Additional Eligibility Criteria for SR&ED and NRC-IRAP Research Incentives

In addition to innovation requirements, IRAP and SR&ED funding maintain eligibility criteria unique to each program. These rules are more focused through the Industrial Research Assistance Program, which awards non-repayable funding contributions (grants) on merit. IRAP funding is competitive in nature where businesses must work to secure project funding. Scientific Research and Experimental Development tax credits are an entitlement to Canadian businesses with qualifying projects, so more businesses will qualify.

NRC-IRAP Research Grants

To qualify for the Industrial Research Assistance Program (IRAP) grant, applicants must:

  • Maintain 1-500 payroll employees;
  • Be incorporated for two years or longer; and
  • Be committed to internal research and development.

SR&ED Research Tax Credits

To qualify for the Scientific Research and Experimental Development (SR&ED) tax credit, applicants must be able to answer “yes” to five standard questions:

  • Was there a scientific or a technological uncertainty?
  • Did the effort involve formulating hypotheses specifically aimed at reducing or eliminating that uncertainty?
  • Was the overall approach consistent with a systematic investigation or search, including formulating and testing the hypotheses by means of experiment or analysis?
  • Was the overall approach undertaken to achieve a scientific or a technological advancement?
  • Was a record of the hypotheses tested and the results kept as work progressed?

Learn More About How IRAP and SR&ED Funding Work

This article compares eligibility criteria for IRAP and SR&ED, two popular Canadian research funding programs for businesses. While this information will help you understand the overall purpose and requirements of each, there is still lots more to consider before your company is ready to commit to a particular funding program. Much of your decision also depends on the amount of funding available, expenses that can be included, and when funding is awarded.

To compare more elements of the IRAP and SR&ED programs, including funding potential and how to apply, please download Mentor Works’ IRAP vs. SR&ED slide deck.

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  1. Great work ‘Mentor Works’. Seeking your advice on funding for our R&D projects. We are based in Calgary Alberta dwelling on a few sectors of industry. Our corporation was expired a few years ago but we have been active on R&D unofficially in Areas of Integrated Smart Farming System which can be applied to Cannabis Cultivation industry. Would you have any interest to assist this project to the industry or have experts in Calgary region?


    1. Hi Eugene, thanks for your comment! Incorporation status is a critical component of eligibility for most government funding programs. Because your corporation “expired a few years ago”, there’s few funding opportunities your business can consider. The best thing to do to expand your funding potential is to re-establish your business. Outside of that, I’d recommend a new program that recently opened to innovative R&D projects in the agriculture sector. Protein Industries Canada (PIC) is a supercluster of businesses, non-profits, and academic institutions. They fund large-scale R&D projects that have a direct impact on agricultural technologies and may be able to help once your business registers as a PIC member.

  2. Hello, Great to read a tabular compilation of these programs, hope it is being updated regularly.
    Kindly also add for each program whether idea stage startup which is only few months or a year old is eligible for any of these programs. IRAP needs two years of incorporated status, ideally there would be some programs you become elgigible after every few quarters of your incorporated status. One would imagine in a fully evolved state of our innovation funding, all programs in above table would have a “Min Number of Months Incorporated” column, which would vary from 6 months to 24 months for different idea stage, early and mid stage support programs.

    1. Hi Susheel – Yes, you’re right that IRAP requires any applicant to be incorporated in Canada for at least 2 years. In fact, it’s the norm for government funding programs to require businesses to be incorporated and have a proven revenue model to minimize their risk of providing funding to businesses that have yet to prove their market viability.
      Annual financial statements are an effective way of showing a successful business model and are often required as part of the funding application process. This is the reason for these programs to counting incorporation status in years instead of months.
      If your business has been incorporated for <2 years, we would recommend that you refer to our Startup Resources Page, as there are support programs available specifically to young growing businesses detailed on that page that might be of interest to you. We understand that young businesses are in need of cash flow, so we hope that these resources help give you the access to cash you need to reach your next growth stage.

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