Technological Uncertainty
Understanding Technological Uncertainty in Innovation:
When companies set out to create groundbreaking products or improve existing processes, they often encounter technological uncertainty—that is, a knowledge gap making it unclear whether a desired outcome can be achieved with the technology and expertise currently at hand. This uncertainty typically springs from complexities such as:
Inapplicable existing design methods
Unique technical specifications that fall outside recognized standards
Insufficient data or evolving problem parameters
In Canada’s SR&ED (Scientific Research & Experimental Development) program, technological uncertainty is a key factor in determining whether experimental work qualifies for tax incentives. Specifically, when a problem arises that cannot be solved through established techniques or readily available knowledge, any systematic investigation or experimentation to resolve that gap may be eligible under SR&ED.
Criteria and Guidelines
According to the SR&ED Eligibility Guidelines, to determine whether work meets the criteria, you must consider both the “Why” and “How” requirements Technological Uncertain…:
The “Why” Requirement (Purpose of the Work)
The work must be conducted for the purpose of achieving technological advancement—the generation of new knowledge to overcome uncertainty.
The desired outcome may be a new or improved product, process, or technology. Even if the attempt is unsuccessful, work that systematically seeks new knowledge could still qualify.
The “How” Requirement (Systematic Investigation or Search)
The approach must involve formulating a hypothesis, testing and analyzing it, then drawing logical conclusions.
Evidence of each step (e.g., records, test results, data) should be kept to demonstrate a clear, methodical process.
Work Excluded from SR&ED
Routine testing, market research, and certain other activities do not qualify. Only the portion of your project specifically addressing scientific or technological uncertainties with a systematic approach is potentially eligible.
By aligning R&D endeavors with these SR&ED criteria, organizations not only push innovation forward but also unlock potential tax credits to support future development. Documenting hypotheses, test approaches, and outcomes is crucial to demonstrating that the ultimate goal was to advance technical understanding rather than simply apply known solutions.
SR&ED Fields of Technology
It all begins with an idea.
The Scientific Research and Experimental Development (SR&ED) program requires businesses to categorize their projects using specific codes that align with fields of science and technology. These codes, integral to the SR&ED application process, help the Canada Revenue Agency (CRA) understand the focus of your R&D efforts. They span diverse disciplines, from software development and advanced manufacturing to biotechnology and environmental sciences. By selecting the correct codes, you not only demonstrate the scope of your innovation but also ensure your claims align with the CRA’s requirements, increasing the likelihood of approval.
1. Information and Communications Technology (ICT)
Key Examples: Software development, cloud computing, data analytics, and cybersecurity solutions.
Eligible Activities: Creating new algorithms, optimizing software performance, or developing new data encryption methods.
Why It Qualifies: These activities often involve resolving technical uncertainties through experimentation or systematic investigation.
2. Engineering and Manufacturing
Key Examples: Robotics, automation, advanced manufacturing techniques, and industrial process optimization.
Eligible Activities: Designing robotic systems for delicate tasks or developing more efficient production processes.
Why It Qualifies: Many engineering innovations focus on improving processes or addressing complex technical challenges.
3. Life Sciences and Biotechnology
Key Examples: Pharmaceuticals, medical devices, agriculture technology, and genomics.
Eligible Activities: Developing new drugs, optimizing vaccine production, or engineering genetically modified crops.
Why It Qualifies: R&D in these areas often seeks to advance scientific knowledge or overcome biological limitations.
4. Energy and Environmental Technologies
Key Examples: Renewable energy, energy storage, carbon capture, and waste reduction technologies.
Eligible Activities: Developing a new solar panel material, improving battery efficiency, or creating systems for industrial heat recovery.
Why It Qualifies: Efforts in these fields focus on creating sustainable solutions or improving energy efficiency.
5. Materials Science
Key Examples: Nanotechnology, composites, and advanced alloys.
Eligible Activities: Developing new materials for aerospace applications or improving the durability of construction materials.
Why It Qualifies: Material research often involves systematic experimentation to achieve better performance or durability.
6. Agriculture and Food Technology
Key Examples: Precision farming, food processing innovation, and sustainability practices.
Eligible Activities: Developing automated systems for crop harvesting or designing new packaging to extend shelf life.
Why It Qualifies: These innovations often solve technical challenges in production or quality assurance.
Fields of Technology -SR&ED
The Scientific Research and Experimental Development (SR&ED) program categorizes eligible activities into specific fields of science or technology, each assigned a unique code. These codes are essential when completing Form T661, as they help the Canada Revenue Agency (CRA) understand the context of your claimed advancements. The main categories and their corresponding codes are as follows:
1. Natural and formal sciences
Mathematics
1.01.01 - Pure mathematics
1.01.02 - Applied mathematics
1.01.03 - Statistics and probability
Computer and information sciences
1.02.01 - Computer sciences
1.02.02 - Information technology and bioinformatics
Physical sciences
1.03.01 - Atomic, molecular and chemical physics
1.03.02 - Interaction with radiation
1.03.03 - Magnetic resonances
1.03.04 - Condensed matter physics
1.03.05 - Solid state physics & superconductivity
1.03.06 - Particles and fields physics
1.03.07 - Nuclear physics
1.03.08 - Fluids and plasma physics (including surface physics)
1.03.09 - Optics (including laser optics and quantum optics)
1.03.10 - Acoustics
1.03.11 - Astronomy (including astrophysics, space science)
Chemical sciences
1.04.01 - Organic chemistry
1.04.02 - Inorganic and nuclear chemistry
1.04.03 - Physical chemistry, polymer science & plastics
1.04.04 - Electrochemistry (dry cells, batteries, fuel cells, metal corrosion, electrolysis)
1.04.05 - Colloid chemistry
1.04.06 - Analytical chemistry
Earth and related Environmental sciences
1.05.01 - Geosciences, multidisciplinary
1.05.02 - Mineralogy & paleontology
1.05.03 - Geochemistry & geophysics
1.05.04 - Physical geography
1.05.05 - Geology & volcanology
1.05.06 - Environmental sciences
1.05.07 - Meteorology, atmospheric sciences & climatic research
1.05.08 - Oceanography, hydrology & water resources
Biological sciences
1.06.01 - Cell biology, microbiology & virology
1.06.02 - Biochemistry, molecular biology & Biochemical research
1.06.03 - Mycology
1.06.04 - Biophysics
1.06.05 - Genetics and heredity (medical genetics under code 3)
1.06.06 - Reproductive biology (medical aspects under code 3)
1.06.07 - Developmental biology
1.06.08 - Plant sciences & botany
1.06.09 - Zoology, ornithology, entomology & Behavioural sciences biology
1.06.10 - Marine biology, freshwater biology & limnology
1.06.11 - Ecology & biodiversity conservation
1.06.12 - Biology (theoretical, thermal, cryobiology, biological rhythm)
1.06.13 - Evolutionary biology
Other natural sciences
1.07.01 - Other natural sciences
2. Engineering and technology
Civil engineering
2.01.01 - Civil engineering
2.01.02 - Architecture engineering
2.01.03 - Municipal and structural engineering
2.01.04 - Transport engineering
Electrical engineering, Electronic engineering & Information technology
2.02.01 - Electrical and electronic engineering
2.02.02 - Robotics and automatic control
2.02.03 - Micro-electronics
2.02.04 - Semiconductors
2.02.05 - Automation and control systems
2.02.06 - Communication engineering and systems
2.02.07 - Telecommunications
2.02.08 - Computer hardware and architecture
2.02.09 - Software engineering and technology
Mechanical engineering
2.03.01 - Mechanical engineering
2.03.02 - Applied mechanics
2.03.03 - Thermodynamics
2.03.04 - Aerospace engineering
2.03.05 - Nuclear related engineering (nuclear physics under 1.03.07)
2.03.06 - Acoustical engineering
2.03.07 - Reliability analysis and non-destructive testing
2.03.08 - Automotive and transportation engineering and manufacturing
2.03.09 - Tooling, machinery and equipment engineering and manufacturing
2.03.10 - Heating, ventilation and Air conditioning engineering and manufacturing
Chemical engineering
2.04.01 - Chemical engineering (plants, products)
2.04.02 - Chemical process engineering
Materials engineering
2.05.01 - Materials engineering & metallurgy
2.05.02 - Ceramics
2.05.03 - Coating and films (including packaging and printing)
2.05.04 - Plastics, rubber and composites (including laminates and reinforced plastics)
2.05.05 - Paper and wood & textiles
2.05.06 - Construction materials (organic and inorganic)
Medical engineering
2.06.01 - Medical and biomedical engineering
2.06.02 - Medical laboratory technology (Biomaterials under 2.09.05)
Environmental engineering
2.07.01 - Environmental and geological engineering
2.07.02 - Petroleum engineering (fuel, oils)
2.07.03 - Energy and fuels
2.07.04 - Remote sensing
2.07.05 - Mining and mineral processing
2.07.06 - Marine engineering, sea vessels & ocean engineering
Environmental biotechnology
2.08.01 - Environmental biotechnology
2.08.02 - Bioremediation
2.08.03 - Diagnostic biotechnologies in environmental management (DNA chips & biosensing devices)
Industrial biotechnology
2.09.01 - Industrial biotechnology
2.09.02 - Bioprocessing technologies
2.09.03 - Biocatalysis & fermentation
2.09.04 - Bioproducts (products that are manufactured using biological material as feedstock)
2.09.05 - Biomaterials (bioplastics, biofuels, bioderived bulk and fine chemicals, bio?derived materials)
Nanotechnology
2.10.01 - Nanomaterials (production and properties)
2.10.02 - Nanoprocesses (applications on nanoscale)
Other engineering and technologies
2.11.01 - Food and beverages
2.11.02 - Oenology
2.11.03 - Other engineering and technologies
3. Medical and health sciences
Basic medicine
3.01.01 - Anatomy & morphology (plant science under 1.06.08)
3.01.02 - Human genetics
3.01.03 - Immunology
3.01.04 - Neurosciences
3.01.05 - Pharmacology and pharmacy & medicinal chemistry
3.01.06 - Toxicology
3.01.07 - Physiology & cytology
3.01.08 - Pathology
Clinical medicine
3.02.01 - Andrology
3.02.02 - Obstetrics and gynaecology
3.02.03 - Paediatrics
3.02.04 - Cardiac and cardiovascular systems
3.02.05 - Hematology
3.02.06 - Anaesthesiology
3.02.07 - Orthopaedics
3.02.08 - Radiology & nuclear medicine
3.02.09 - Dentistry, oral surgery and medicine
3.02.10 - Dermatology, venereal diseases & allergy
3.02.11 - Rheumatology
3.02.12 - Endocrinology and metabolism & gastroenterology
3.02.13 - Urology and nephrology
3.02.14 - Oncology
Health sciences
3.03.01 - Health care sciences & nursing
3.03.02 - Nutrition & dietetics
3.03.03 - Parasitology
3.03.04 - Infectious diseases & epidemiology
3.03.05 - Occupational health
Medical biotechnology
3.04.01 - Health related biotechnology
3.04.02 - Technologies involving the manipulation of cells, tissues, organs or the whole organism
3.04.03 - Technologies involving identifying the functioning of DNA, proteins and enzymes
3.04.04 - Pharmacogenomics, gene based therapeutics
3.04.05 - Biomaterials (related to medical implants, devices, sensors)
Other medical sciences
3.05.01 - Forensic science
3.05.02 - Other medical sciences
4. Agricultural sciences
Agriculture, Forestry, and Fisheries
4.01.01 - Agriculture
4.01.02 - Forestry
4.01.03 - Fisheries and Aquaculture
4.01.04 - Soil science
4.01.05 - Horticulture
4.01.06 - Viticulture
4.01.07 - Agronomy
4.01.08 - Plant breeding & plant protection
Animal and Dairy science
4.02.01 - Animal and dairy science
4.02.02 - Animal husbandry (Animal biotechnology under 4.04.01)
Veterinary science
4.03.01 - Veterinary science (all)
Agricultural biotechnology
4.04.01 - Agricultural biotechnology & food biotechnology
4.04.02 - Genetically Modified (GM) organism technology & livestock cloning
4.04.03 - Diagnostics (DNA chips and biosensing devices)
4.04.04 - Biomass feedstock production technologies
4.04.05 - Biopharming
Other agricultural sciences
4.05.01 - Other agricultural sciences
Excluded fields
The following fields of science are specifically excluded by law for the purposes of SR&ED:
Social Sciences
Psychology (Psychological research may be eligible as a support activity)
Sociology
Social and economic geography
Economics and Business
Law
Media and communications
Educational sciences
Political science
Other social sciences
Humanities
History and Archaeology
Arts
Languages and Literature
Other Humanities
Philosophy, Ethics and Religion