Budget 2025: SR&ED changes at a glance

Announced on November 4th, the 2025 Federal Budget aims to modernize the SR&ED programs by doubling the enhanced expenditure limit to $6 million, extending the 35% rate to eligible public corporations, and restoring capital expenditures as qualifying costs. The government projects roughly $440 million in additional annual credits to mobilize about $1.2 billion in new private R&D. The CRA will introduce an elective pre-approval pathway, AI-supported triage, and a simplified review process targeting 90-day processing for approved claims beginning April 1, 2026.

List of announced SR&ED Changes

• Overall Budget Commitment: Budget 2025 represents an additional $440 million per year in tax credits for R&D, on top of an existing ~$4.2 billion annual program cost.

• Enhanced Expenditure Limit Raised: The annual expenditure limit for the 35% SR&ED tax credit will increase from $3 million to $6 million (effective for tax years beginning after Dec 16, 2024). This expands the amount of R&D spending that can qualify for the higher credit rate.

• Public Companies: The 35% enhanced SR&ED credit is being extended to eligible public corporations (not just CCPCs), allowing certain publicly traded companies (generally smaller ones within the new size thresholds) to benefit from the higher credit rate on their R&D expenditures.

• Expenditure Limit Threshold Change: The phase-out range for the enhanced credit is broadened – taxable capital between $15 million and $75 million (in the prior year) will gradually reduce a company’s enhanced expenditure limit, up from the previous $10–$50 million range. This adjustment enables larger mid-sized companies to still qualify for partial enhanced credits.

• Capital Expenditures Now Qualify: The budget restores SR&ED eligibility for capital expenditures (e.g. R&D equipment and facilities) for both the deduction and credit components. Companies can again claim investment tax credits on qualifying capital purchases related to R&D, reversing a restriction that had disallowed these claims since 2014.

• No Change to Credit Rates/Refundability: The SR&ED tax credit rates remain 35% (enhanced) and 15% (general). The 35% rate continues to be fully refundable for small CCPCs, while the 15% rate is non-refundable for others. However, with the new rules, more expenditures and more firms fall under the 35% refundable credit (though the budget did not specify refundability for the newly eligible public companies).

• Administrative Reforms Announced (to take effect April 1, 2026): The CRA will implement an elective pre-approval process for SR&ED claims (allowing upfront project eligibility confirmations). It will also use AI to fast-track low-risk claims and streamline the claim review process, aiming to reduce wait times (targeting 90-day processing for approved claims) and ease compliance burdens on claimants.

If you would like this translated into a filing plan for your fiscal year, we can map the changes to cash flow, eligibility, and documentation requirements for your next claim.