Can You Claim SR&ED for Work Done Before Incorporation?

One of the most common questions we hear from founders is:

“We started developing our product before we incorporated — can we still claim SR&ED for that work?”

The answer is: sometimes yes, sometimes no. It depends on how the work was documented, who legally owned it, and whether it was transferred to the corporation.

The General Rule

SR&ED is claimed by the entity that performed the eligible work. For corporations, that means:

• The corporation must have been the legal owner of the R&D work when it was performed or
• The work must have been legally transferred to the corporation after incorporation.

If the R&D was done personally before incorporation, the corporation cannot claim it unless that transfer step happens.

When Pre-Incorporation Work Can Count

If you incorporate during the same fiscal year, your corporation may still be able to include the earlier work in its SR&ED claim if:

1. The work meets the SR&ED eligibility criteria (technological uncertainty, systematic investigation, technological advancement).
2. You kept contemporaneous documentation of the work (design logs, experiments, test results).
3. You legally transferred the IP, rights, and related expenses from yourself (as a sole proprietor) to the corporation.
4. The costs are clearly recorded and substantiated with invoices, receipts, or payroll records.

Practical Example

Scenario where it counts:

• January to April: You develop a novel computer vision algorithm as a sole proprietor.
• May: You incorporate your startup and execute an IP and expense transfer agreement, assigning all rights, data, and supporting records to the corporation. The corporation either reimburses you for the expenses or books them as assumed liabilities.
• December: You file your first T2 and T661, claiming the January–December eligible work as part of the corporation’s SR&ED claim.

Scenario where it does not count:

• January to April: You build the same algorithm personally, but without any intention of assigning it to a future corporation.
• May: You incorporate but do not transfer the earlier work, costs, or IP. The earlier work remains personal, and CRA will only allow the corporation to claim work done after May.

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Two Common Misunderstandings

1. “It’s the same fiscal year, so it automatically counts.”

   Not true. CRA requires that the work belong to the claimant. Without a legal transfer, the pre-incorporation work remains outside the corporation’s claim.

2. “I have receipts, so that’s enough.”

   Receipts alone are not enough. You need both financial records and technical documentation showing the work aligns with SR&ED criteria.

Best Practices for Founders Planning to Incorporate

If you expect SR&ED to be part of your funding strategy:

• Incorporate early to avoid the transfer issue altogether.
• Keep detailed technical and financial records from day one.
• If you start as a sole proprietor, plan for a formal IP and expense transfer to the corporation.
• Use a central logbook or documentation tool so your R&D story is complete and CRA-ready.

The Bottom Line

Pre-incorporation work can be included in your first SR&ED claim if you take the right legal and accounting steps to transfer it to your corporation. Without that step, CRA will treat it as personal work, and you could lose out on valuable credits.

SREDSimplify makes it easier to assess whether your past work might qualify. Our free pre-screener will guide you through the key eligibility questions and help you decide the next step.

Try it here: https://sredsimplify.com/

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