Carter Marine Group (CMG) specializes in marine infrastructure projects.  In 2016, the company was approached by a client to create a permanent wharf in a high traffic import and export area.

CMG conducted SR&ED work to fulfill its client’s request with the main business objective being to design and develop a permanent wharf to assist in the importing and exporting of products in the oil and gas industry.

To qualify for the Scientific Research and Experimental Development Tax Incentive Program, CMG had to make sure its “qualified research” met the definition of “scientific research and experimental development” in subsection 248(1) of the Income Tax Act (see Commentary below).  After self-assessing, CMG declared the following experiments as SR&ED work.


Design and development of a series of prototypes to achieve the technical objectives (design of the permanent wharf).

The hypothesis for this activity stated that CMG could design a permanent wharf in a high traffic area to support imports/exports of the oil and gas industry.

After conducting theoretical design experiments, CMG concluded that such a design was feasible, but needed to be prototyped and fully tested to prove the hypothesis.

Trials and analysis of data to achieve results that can be reproduced to a satisfactory standard (prototype development and testing of the permanent wharf).

The hypothesis for this phase of the SR&ED experiment was that CMG could develop and test the wharf design to prove that it could be permanently installed to help the organization achieve its project objectives.

CMG concluded that the theoretical conclusions from the design phase could be realized through prototype development and related tests. CMG stated that the new knowledge generated would be used for further iterations of design and development and further field testing.

Background research to evaluate current knowledge gaps and determine feasibility (background research for permanent wharf).

CMG conducted the following SR&ED activities during this phase of its project:

  • Literature search and review
  • Initial discussions with marine engineers to discuss the feasibility of the project
  • Review of existing drawings
  • Consultation with industry professionals and potential customers to determine the level of interest and commercial feasibility of such a project
  • Preliminary equipment and resources review with respect to capacity, performance and suitability for the project
  • Consultation with key component/part/assembly suppliers to determine the factors they considered important in the design and to gain an understanding of how the design needed to be structured accordingly

The activities conducted during the background research were necessary because they assisted in identifying the key elements of the research project, therefore qualifying as SR&ED work.

Ongoing analysis of customer or user feedback to improve the prototype design (feedback SR&ED of the permanent wharf).

CMG’s eligible SR&ED activities for this phase of the project included:

  • Ongoing analysis and testing to improve the efficiency and safety of the project.
  • Ongoing development and modification to interpret the experimental results and draw conclusions that served as starting points for the development of new hypotheses.
  • Commercial analysis and functionality review.

These activities were necessary to evaluate the performance capabilities of the new design in the field and to improve any flaws in the design.


To qualify, the work must meet the following definition of “scientific research and experimental development” (SR&ED), as defined in subsection 248(1) of the Income Tax Act.

“Scientific research and experimental development” means systematic investigation or search that is carried out in a field of science or technology by means of experiment or analysis and that is:

(a) basic research, namely work undertaken for the advancement of scientific knowledge without a specific practical application in view;

(b) applied research, namely work undertaken for the advancement of scientific knowledge with a specific practical application in view; or

(c) experimental development, namely, work undertaken for the purpose of achieving technological advancement for the purpose of creating new, or improving existing, materials, devices, products or processes, including incremental improvements thereto;

and, in applying this definition in respect of a taxpayer, includes:

(d) work undertaken by or on behalf of the taxpayer with respect to engineering, design, operations research, mathematical analysis, computer programming, data collection, testing or psychological research, where the work is commensurate with the needs, and directly in support, of work described in paragraph (a), (b), or (c) that is undertaken in Canada by or on behalf of the taxpayer.


Similar to any tax credit or deduction, CMG had to save business records that outlined what it did in its SR&ED activities, including experimental activities and documents to prove that the work took place in a systematic manner.

CMG saved the following documentation:

  • Literature review
  • Project plans
  • Photographs
  • Progress reports
  • Test results and analysis
  • Customer feedback
  • Field-test results

By having these records on file, CMG confirmed that it was “compliance ready” — meaning if it was audited by the CRA, it could present documentation to show the progression of its SR&ED work, ultimately proving its SR&ED eligibility.

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