For over a decade, capital expenditures were excluded from SR&ED claims. Bill C-15 changed that, and for manufacturing, hardware development, and other capital-intensive R&D companies, the impact is substantial. Here is what the change means in practice and how to make sure you claim what you are entitled to.
What Changed Under Bill C-15
Prior to 2014, companies could claim both current expenditures (salaries, materials, overhead) and capital expenditures (equipment, machinery, testing apparatus) under SR&ED. The 2012 federal budget phased out capital expenditure eligibility, and from 2014 onward, capital costs were entirely excluded.
Bill C-15 reverses that exclusion for property acquired after December 15, 2024. If you purchased qualifying equipment after that date and used it in SR&ED work, you can include it in your claim.
What Qualifies
The following categories of capital expenditure are now eligible when the equipment is used in SR&ED activities:
Machinery and testing equipment: Specialized test rigs, environmental chambers, coordinate measuring machines, signal analyzers, oscilloscopes, and other instruments used to conduct experiments or validate results qualify when they are used in SR&ED work.
Manufacturing R&D equipment: Prototype fabrication equipment, CNC machines, 3D printers, and tooling used to build and test experimental designs, not for commercial production, can qualify.
Compute infrastructure for AI/ML: GPUs, tensor processing units, and high-performance compute clusters used specifically for training and testing experimental models are eligible. This is particularly significant for AI companies that have been making substantial investments in compute hardware.
Specialized tools and fixtures: Custom-built jigs, fixtures, and testing apparatus designed specifically for an SR&ED project can be claimed.
Sensors and data acquisition systems: Equipment used to gather experimental data as part of a systematic investigation qualifies when it is integral to the research.
What Does Not Qualify
The restoration of capital eligibility does not mean all equipment used in the business qualifies.
Buildings and leasehold improvements: Real property remains excluded. The lab building itself does not qualify, even if it is used exclusively for SR&ED.
Land: Excluded categorically.
General-purpose office equipment: Laptops, monitors, and standard office infrastructure used by researchers do not qualify simply because the researchers work on SR&ED projects.
Equipment used in commercial production: If the equipment is used to produce goods for sale, even goods that resulted from SR&ED, the production use must be separated from the research use. Only the portion of use that supports SR&ED is eligible.
Inventory and supplies: Materials consumed in the SR&ED process are treated as current expenditures, not capital. The distinction matters for how they are claimed on the T661.
The December 15, 2024 Effective Date
The critical date is December 15, 2024. Equipment acquired on or after that date is eligible; equipment acquired before that date is not, regardless of when it was used. If you made capital purchases in anticipation of SR&ED work and received the equipment before December 15, 2024, those costs are excluded.
For equipment acquired after December 15, 2024, you can claim the full capital cost in the year of acquisition. You do not need to depreciate it over its useful life for SR&ED purposes.
How to Document Capital Expenditures for SR&ED
Documentation requirements for capital expenditures are similar to other SR&ED costs, with some additional considerations:
Purchase records: Keep invoices, purchase orders, and delivery records that clearly show the acquisition date. The date the equipment was received and available for use is what CRA will look at to determine eligibility under the December 15, 2024 threshold.
Usage logs: If equipment is used for both SR&ED and non-SR&ED purposes, you need records that support the allocation. A simple usage log showing hours or days allocated to specific SR&ED projects versus other purposes is sufficient.
Project linkage: Each piece of capital equipment should be tied to a specific SR&ED project in your T661. The equipment’s purpose in the context of the research, not just its general description, should be clear.
A Practical Example
A southern Ontario manufacturer of precision components was developing a new heat-treatment process for a specialized alloy. In January 2025, they purchased a $380,000 vacuum furnace specifically for experimental runs. Under the rules before Bill C-15, that equipment was entirely ineligible. Under Bill C-15, because the furnace was acquired after December 15, 2024, and is being used in a qualifying SR&ED project, the full $380,000 is now claimable, potentially generating $133,000 in refundable federal SR&ED credits at the enhanced 35% rate.
That is the kind of impact that has been off the table since 2014. If you have made capital purchases since December 15, 2024 for R&D purposes, it is worth reviewing whether they belong in your next SR&ED claim.