SR&ED vs IRAP and Grants: Plan Them Together
Founders often lump SR&ED, IRAP, provincial grants, wage subsidies and investor credits together. They work differently: one is a tax credit after the fact, one is a contribution applied for in advance, and both affect each other. One person should own the whole map.
How is SR&ED different from IRAP and grants?
| Program type | How it usually works | Founder consideration |
|---|---|---|
| SR&ED | Tax incentive claimed after the year, based on eligible work and costs | Track evidence and costs from day one; cash arrives after filing |
| Provincial R&D credit | Provincial layer on eligible R&D | Depends on where work is done; reduces the federal base |
| IRAP and grants | Applied for before or during a defined project | Expect milestones, reporting and claims |
| Hiring or training credits | Tied to qualifying employees or placements | Check eligibility and keep payroll records |
| Investor-focused credits | Encourage investment in eligible companies, often provincial | Only if they fit your financing plan |
How does assistance affect SR&ED?
Government and non-government assistance for SR&ED work reduces qualified expenditures, project by project, by the amount received or reasonably expected. Provincial R&D credits count as assistance too (CRA’s assistance and contract payments policy). So an IRAP-funded salary still helps, but it shrinks the SR&ED base for that project.
How do you keep it under control?
| Program | Type | Covers | Owner | Next date |
|---|---|---|---|---|
| Federal SR&ED | Tax credit | Eligible R&D salaries and costs | CFO | File with return |
| Ontario OITC | Tax credit | Ontario SR&ED | CFO | Schedule 566 |
| NRC IRAP | Contribution | Project salaries, milestone-based | CTO | Claim, Nov 15 |
| Hiring credit | Incentive | Eligible new hire | COO | Placement report |
Keep one map with every grant, credit, funded cost, restriction and reporting date, owned by the founder, finance lead or advisor.
Should you use IRAP and SR&ED together?
Often yes. IRAP can fund a project as it happens, and SR&ED can return part of the remaining eligible cost later. The details of combining them are in the IRAP guide: IRAP vs SR&ED and stacking IRAP funding.
One owner, one map.
Non-dilutive funding works best when one person tracks every program, cost and deadline.
How should founders use non-dilutive money?
Treat grants and credits as part of the capital plan, funding milestones investors and customers care about, not side projects. Don’t assume every program stacks perfectly in your cash-flow plan. The credit estimate is on how much SR&ED you get back, timing on review and timeline, and costs on eligible expenses.
Frequently asked questions
What is the difference between SR&ED and IRAP?
SR&ED is a tax credit claimed after the work; IRAP is a contribution applied for before or during a defined project.
Can I claim SR&ED and IRAP on the same project?
Often yes, but IRAP assistance reduces the SR&ED qualified expenditures for that project.
Do grants reduce SR&ED?
Government and many non-government assistance amounts reduce qualified SR&ED expenditures.
Do provincial credits count as assistance?
Yes. CRA treats provincial R&D credits as government assistance.
Who should manage grants and tax credits?
One owner, usually the founder, finance lead or an advisor, with a single funding map.
Is non-dilutive funding worth the admin?
Usually, when tied to milestones you’d fund anyway and tracked in one place.
Sources & further reading
Standards and platform rules change. These sources let you verify the current requirements directly. All screens shown are mock-ups of fictional products.