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The Money Ontario Medical and Tech Businesses Leave on the Table: SR&ED Tax Credits Explained
Ontario businesses can get up to 35% of R&D costs back through SR&ED credits. Most never claim them.
It’s March 2026, and tax season is in full swing.
Businesses are finalizing their 2025 returns, reviewing expenses, and looking for deductions they might have missed.
Most Ontario medical practices and tech companies focus on the obvious: equipment depreciation, office expenses, professional fees, payroll costs.
What they miss: Scientific Research and Experimental Development (SR&ED) tax credits that could return thousands—sometimes hundreds of thousands—of dollars to their business.
Medical practices spend significant amounts developing and testing new patient care protocols without realizing this qualifies for substantial tax credits.
Tech companies invest heavily in developing proprietary software, assuming “tax credits” are only for large pharmaceutical companies doing drug trials.
Manufacturing businesses work for months solving technical problems with their production processes but don’t document the work properly, making claims impossible later.
At KK CPA, we see Ontario businesses—especially medical practices and tech companies—leave substantial money unclaimed every year because they don’t understand what qualifies for SR&ED credits or how complex the claim process actually is.
Here’s what Ontario medical and tech businesses need to know about SR&ED tax credits.
What Is SR&ED and Why Should Ontario Businesses Care?
SR&ED stands for Scientific Research and Experimental Development. It’s a federal tax incentive program designed to encourage Canadian businesses to conduct research and development.
The incentive:
Businesses can claim tax credits for eligible R&D expenditures. These credits reduce your taxes owing or, in many cases, generate cash refunds.
For small Canadian-Controlled Private Corporations (CCPCs) in Ontario:
- Federal refundable credit: Up to 35% of eligible expenditures (first $3 million)
- Ontario refundable credit: Up to 3.5% of eligible expenditures
- Combined: Up to 38.5% of your eligible R&D costs returned to you
Example:
Your Ontario CCPC spent $100,000 on eligible SR&ED activities in 2025.
Potential credits:
- Federal: $35,000 (35% refundable)
- Ontario: $3,500 (3.5% refundable)
- Total: $38,500
That’s money returned to your business—either reducing your tax bill or arriving as a refund cheque.
Why businesses don’t claim it:
They don’t realize their activities qualify. They think SR&ED is only for labs in white coats discovering new molecules. They assume the paperwork is too complex. They’ve never heard of it.
All of those leave money on the table.
What Ontario Medical Practices Don’t Realize Qualifies for SR&ED
When most medical professionals hear “research and development,” they think: university researchers, clinical drug trials, academic medicine.
They don’t think: my practice.
But many activities that Ontario medical practices engage in daily qualify for SR&ED credits.
SR&ED-eligible activities in medical practices:
Developing New Treatment Protocols
You’re not just following standard protocols. You’re developing, testing, and refining new approaches to patient care.
Example:
A family medicine practice developed a new chronic disease management protocol combining remote monitoring, medication adjustments, and lifestyle interventions. They tested it with a cohort of patients, documented outcomes, refined the approach based on results.
That’s SR&ED-eligible work. The time spent developing the protocol, the testing phase, the analysis of outcomes, the refinement based on data—all potentially eligible expenditures.
Most practices do this and never realize it qualifies.
Adapting Medical Technologies or Devices
You purchase a medical device or technology and need to adapt it for your specific patient population or practice setting.
Example:
A physiotherapy clinic acquired new rehabilitation equipment but needed to develop custom protocols for geriatric patients with specific mobility limitations. They spent months testing different approaches, documenting outcomes, and refining techniques.
The development work—not the equipment purchase itself, but the systematic experimentation to determine optimal use—can qualify for SR&ED credits.
Developing Custom Software or Digital Health Tools
Your practice builds or significantly customizes software for patient management, diagnostics, treatment planning, or remote monitoring.
Example:
A dental practice worked with a developer to create a custom patient imaging analysis tool that integrates with their existing systems and provides treatment planning recommendations based on their specific protocols.
The software development work—especially if it involved overcoming technical challenges or uncertainties—can qualify.
Clinical Research and Trials (Even Small Scale)
You’re participating in or conducting clinical research, even if it’s not a major pharmaceutical trial.
Example:
An Ontario medical practice collaborated with a hospital on a pilot study testing a new approach to diabetes management in underserved populations. The practice contributed clinical time, patient recruitment, data collection.
Those activities can generate SR&ED credits, even if the practice isn’t the primary research institution.
The pattern:
If your medical practice is doing more than routine patient care—if you’re developing, testing, refining, adapting, or creating something new—you might have SR&ED-eligible activities.
Most practices never explore this because they don’t think “research” applies to them.
What Ontario Tech Companies Miss About SR&ED Eligibility
Tech companies are more likely to have heard of SR&ED than medical practices. But many still underestimate what qualifies.
Common misconception:
“We’re not inventing anything groundbreaking, so we don’t qualify.”
Reality:
You don’t need to be creating the next revolutionary technology. You need to be working to overcome technological uncertainties through systematic experimentation.
SR&ED-eligible activities in tech companies:
Custom Software Development
You’re building software (for clients, for internal use, for your own product) and you encounter technical challenges that aren’t solved by routine coding.
Example:
A software company was contracted to build a custom inventory management system for a manufacturing client. The integration requirements created technical challenges that couldn’t be solved with off-the-shelf solutions. The development team spent months experimenting with different architectural approaches, testing performance under various loads, and solving data synchronization issues.
That systematic experimentation to overcome technical uncertainty qualifies.
Algorithm Development
You’re developing new algorithms or significantly improving existing ones to solve specific problems.
Example:
A fintech startup developed proprietary algorithms for fraud detection that improved accuracy over existing methods. The development involved hypothesis testing, iterative refinement, and validation against real-world data sets.
Eligible SR&ED work.
System Architecture and Integration
You’re solving complex technical problems integrating systems, optimizing performance, or scaling infrastructure.
Example:
A SaaS company faced performance issues as their user base grew. They spent months experimenting with different database architectures, caching strategies, and load balancing approaches to achieve performance targets.
The systematic experimentation to resolve technological uncertainty qualifies.
Hardware-Software Integration
You’re developing systems that integrate hardware and software in novel ways or overcome integration challenges.
Example:
An Ontario tech company developed IoT devices for industrial monitoring. The work involved overcoming challenges in power consumption, data transmission reliability, and sensor accuracy under varying environmental conditions.
Eligible work.
The key distinction:
Routine engineering and programming don’t qualify. But when you’re facing technological uncertainties—problems where the solution isn’t known or obvious, requiring systematic investigation—that’s when SR&ED applies.
Many tech companies have qualifying work but don’t recognize it as such.
Why Ontario Businesses Don’t Claim SR&ED (And Why That’s Expensive)
Reason #1: “We didn’t know it existed”
Most small and medium-sized Ontario businesses have never heard of SR&ED. It’s not widely advertised. Unless your accountant mentions it or you happen to research it, you might never know.
Reason #2: “We don’t think our work qualifies”
The definition of “scientific research” sounds academic. Businesses doing practical development work don’t see themselves fitting that description.
Reason #3: “The paperwork is too complex”
SR&ED claims require detailed technical documentation, financial tracking, and specific forms. Many businesses look at the requirements and give up.
Reason #4: “We didn’t document properly during the year”
SR&ED claims require contemporaneous documentation of the work. If you didn’t track your R&D activities, time spent, and technical challenges as they happened, reconstructing it after the fact is difficult or impossible.
Reason #5: “We can’t afford the help”
Some businesses know about SR&ED but assume they need expensive consultants to claim it. They weigh the potential credit against the consultant cost and decide it’s not worth it.
The cost of not claiming:
If your Ontario business had $100,000 in eligible SR&ED expenditures in 2025 and didn’t claim it, you left $38,500 on the table.
If this happens year after year, the unclaimed amounts become substantial.
What Makes SR&ED Claims Complex (And Why DIY Usually Fails)
SR&ED isn’t like claiming a standard business expense. You can’t just list “research costs” on your tax return and get the credit.
The complexity:
Technical Documentation Requirements
You need to document:
- What technological uncertainty you were trying to resolve
- What hypotheses you tested
- What experiments or systematic investigations you conducted
- What results you obtained
- How you refined your approach based on those results
This isn’t casual note-taking. CRA has specific expectations for what constitutes adequate technical documentation.
Financial Tracking
You need to identify and track:
- Direct labour costs (salaries of employees conducting SR&ED work, proportional to time spent on eligible activities)
- Materials consumed in SR&ED
- Overhead costs (calculated using specific CRA-approved methods)
- Contractor costs (subject to specific rules)
Standard bookkeeping doesn’t usually capture this level of detail unless you set up tracking systems specifically for SR&ED.
Eligibility Determination
Not every development activity qualifies. CRA has specific criteria:
- Must involve technological uncertainty (not just business uncertainty)
- Must use systematic investigation or experimentation
- Must be advancing science or technology (not just adopting existing approaches)
Determining what qualifies requires understanding both the technical work and the CRA criteria.
Form Complexity
The SR&ED claim involves:
- Form T661 (detailed technical and financial information)
- Supporting schedules
- Technical narrative describing the work
- Financial calculations following specific methodologies
It’s not a simple one-page form.
CRA Review Process
SR&ED claims are reviewed by CRA’s specialized SR&ED review division. They may request additional documentation, conduct interviews, or audit the claim.
Having claims structured properly from the start determines whether they survive review.
Why DIY fails:
Businesses try to claim SR&ED themselves. They fill out forms based on their best understanding. They submit incomplete or improperly structured claims.
CRA denies or reduces the claim. The business gives up or assumes they didn’t qualify after all.
In reality, they may have had legitimate qualifying work but didn’t present it in the way CRA requires.
The Ontario Advantage: Provincial SR&ED Credits
Beyond federal SR&ED credits, Ontario offers its own refundable SR&ED credit.
Ontario Innovation Tax Credit (OITC):
- 3.5% refundable credit on eligible SR&ED expenditures
- Available to CCPCs with Ontario establishments
- Claimed in addition to federal credits
- Separate application process
Combined benefit:
Federal (35%) + Ontario (3.5%) = 38.5% total potential credit
Example:
$200,000 in eligible SR&ED expenditures:
- Federal credit: $70,000
- Ontario credit: $7,000
- Total: $77,000
The catch:
You must claim both. They’re not automatic. The Ontario credit requires a separate application.
Many businesses claim federal SR&ED and don’t realize they’re eligible for the Ontario credit as well.
The Documentation Problem: Why “We Did the Work But Didn’t Write It Down” Doesn’t Work
The biggest barrier to successful SR&ED claims isn’t whether the work qualifies. It’s whether you can prove it.
CRA’s requirement:
Contemporaneous documentation. That means records created during the work, not reconstructed afterward.
What CRA wants to see:
- Project plans describing the technological challenge
- Lab notebooks, development logs, or technical notes documenting experiments, tests, iterations
- Meeting notes discussing technical problems and solutions
- Design documents, specifications, test results
- Time tracking showing who worked on what and when
- Financial records tying costs to specific projects
What doesn’t work:
“We developed new software in 2025. It took six months and cost $150,000. We want SR&ED credits.”
Without documentation of what technical uncertainties you faced, what approaches you tried, what failed, what succeeded, and how you systematically investigated the problem—CRA won’t accept the claim.
The timing problem:
You can’t go back and create this documentation after the fact. If you’re reading this in March 2026 and thinking “we did qualifying work in 2025 but didn’t document it,” your ability to claim is severely compromised.
You might still be able to claim something if you can piece together supporting evidence (emails, code commits, meeting notes that happened to be saved). But it’s much harder than if you had documented properly from the start.
For 2026:
If you think you’ll have SR&ED-eligible work this year, the time to set up documentation systems is now, not in March 2027.
Common SR&ED Mistakes Ontario Businesses Make
Mistake #1: Claiming Everything as SR&ED
Not all development is SR&ED. Routine engineering, implementing known solutions, standard software development following established patterns—these don’t qualify.
Businesses sometimes claim all their development costs and get denied because they didn’t distinguish between routine work and work involving technological uncertainty.
Mistake #2: Poor Technical Narrative
The technical description is critical. CRA reviewers need to understand:
- What was uncertain
- Why existing knowledge/methods were insufficient
- What you systematically investigated
A vague narrative like “we developed new software” doesn’t cut it.
Mistake #3: Inadequate Time Tracking
You can’t claim labour costs without knowing how much time was spent on SR&ED-eligible activities vs. other work.
Estimating after the fact (“probably about 50% of our time”) doesn’t meet CRA standards.
Mistake #4: Misunderstanding Contractor Costs
Special rules apply to contractor costs. You can’t just claim what you paid contractors at face value.
Many businesses get this wrong and have contractor costs disallowed.
Mistake #5: Not Claiming Ontario Credits
Claiming federal SR&ED but missing the Ontario credit leaves 3.5% on the table.
Mistake #6: Giving Up After First Denial
CRA denies or reduces a claim. The business assumes they didn’t qualify.
Sometimes the work did qualify, but the claim was poorly structured or documented. With proper resubmission or objection, it could succeed.
Who Should Be Thinking About SR&ED in Ontario
Medical practices that:
- Develop new treatment protocols or clinical pathways
- Participate in clinical research or trials
- Adapt medical technologies for specific patient populations
- Build or customize digital health tools
- Test new approaches to practice management or patient care
Tech companies that:
- Develop custom software with technical challenges
- Create new algorithms or significantly improve existing ones
- Solve complex integration or performance problems
- Develop hardware-software systems
- Overcome technological uncertainties in product development
Manufacturing businesses that:
- Develop new production processes or techniques
- Improve product design through systematic experimentation
- Solve technical problems in automation or efficiency
- Test new materials or methods
Other Ontario businesses:
- Architecture/engineering firms solving novel technical challenges
- Food and beverage companies developing new products or processes
- Any business conducting systematic experimentation to overcome technological uncertainty
The question to ask:
“Did we spend time and money in 2025 solving technical problems where the solution wasn’t obvious or known, requiring us to test different approaches?”
If yes, you might have SR&ED-eligible work.
The Risk of Waiting: Time Limits and Missed Opportunities
SR&ED claims have deadlines:
You must file your SR&ED claim within 18 months of your tax year-end.
For calendar year corporations (December 31, 2025 year-end):
SR&ED claim deadline: June 30, 2027
That sounds like plenty of time. But the work of preparing a proper SR&ED claim—gathering documentation, preparing technical narratives, calculating eligible expenditures—takes months.
For 2025 work:
If you’re considering an SR&ED claim, you need to start the process now (March 2026), not in June 2027.
For 2024 and earlier:
If you had qualifying work in 2024, 2023, or 2022 that you didn’t claim, the deadlines may be approaching or may have already passed.
For 2024 (December 31 year-end): Deadline is June 30, 2026—three months away.
If you miss the deadline, you lose the credits permanently. There’s no retroactive claiming years later.
What You’re Actually Deciding
When Ontario medical and tech businesses skip SR&ED claims, they’re making a choice:
Leave money unclaimed that the government has specifically set aside to encourage research and development.
The amounts aren’t trivial:
- $50,000 in eligible expenditures = $19,250 in credits
- $100,000 in eligible expenditures = $38,500 in credits
- $200,000 in eligible expenditures = $77,000 in credits
- $500,000 in eligible expenditures = $192,500 in credits
For small and medium-sized Ontario businesses, those amounts can fund new equipment, additional staff, expanded services, or simply improve cash flow.
The decision:
Invest time and resources into exploring whether you qualify and preparing a proper claim.
Or assume you don’t qualify (or that it’s too complex) and leave the money unclaimed.
What determines success:
Whether you have proper documentation, whether the claim is structured to meet CRA requirements, whether the technical narrative clearly demonstrates technological uncertainty and systematic investigation.
This isn’t something most businesses can assess or execute on their own without expertise in both SR&ED requirements and their specific industry.
The Bottom Line
SR&ED tax credits represent substantial money available to Ontario medical practices, tech companies, and other businesses conducting research and development.
Most businesses either don’t know about it, don’t think they qualify, or don’t know how to claim it properly.
The result: hundreds of thousands of dollars in unclaimed credits across Ontario businesses every year.
For 2025, the opportunity still exists. But time is limited—documentation requirements, claim complexity, and deadlines mean this isn’t something to explore casually in a year.
And for 2026, if you’re doing work that might qualify, the time to set up proper tracking and documentation systems is now.
Need Help Determining If Your Ontario Business Qualifies for SR&ED Credits?
At KK CPA, we help Ontario medical practices, tech companies, and other businesses identify SR&ED-eligible activities and prepare successful claims.
We can help you:
- Assess whether your 2025 work qualifies for SR&ED credits
- Review documentation to determine claim viability
- Identify what additional information you need to support a claim
- Determine potential credit amounts
- Guide you on documentation requirements for 2026 activities
- Connect you with SR&ED specialists when needed
Don’t leave money on the table because you didn’t know it was available or didn’t think you’d qualify.
📍 Serving Ontario businesses including Hamilton, Ancaster, Burlington, and the Greater Toronto Area
📞 Toll Free: 855-667-1727
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