The Canada Revenue Agency (CRA) allows claimants under the Scientific Research & Experimental Development (SR&ED) tax incentive program to describe their SR&ED project work at a technological level, and with a technological focus because this is the level at which SR&ED work must be evaluated.
Technological Innovation & New Knowledge
The SR&ED program is meant to encourage technological innovation in Canadian companies, which includes the pursuit of new technological knowledge. Claimants identify qualifying project work and costs, and then claim either a tax refund or a tax credit based on those costs.
People commonly confuse the business purpose or commercial intent of a project with the technology used to deliver that intent, so that they end up talking about what a given project will “do” (such as system features or functionality). SR&ED is not about what you do with the technology, but what you do to the technology.
Hitting the SR&ED Nail on the Head
To put this in easy-to-understand terms, a hammer is the technology and “hitting nails” (or thumbs) is the functionality. If you were talking about a complex computer system or network or mechanical device or process, it would be necessary to look at the technical building blocks used to assemble the system – combinations of hardware and software and other components – and the interactions between them. Aspects of the technical performance, such as transaction speed or quality, consistency, latency, etc., would potentially present “technological issues” or “uncertainty”, and potential for SRED in trying to resolve those problems or overcome limitations of existing technologies or known methodologies.
Business risk or failing to meet a business goal is not the same thing as technological uncertainty Put more simply, technological uncertainty begins when standard approaches to a technological problem, as described in the above paragraph, have failed or been ruled out.
Returning to the hammer example, hitting one’s thumb would be a business risk, but inventing a hammer that can tell the difference between a thumb and a nail, that could be a technological advancement.
