The Canadian government’s recent changes to the Scientific Research and Experimental Development (SR&ED) program could significantly boost the country’s hard tech and manufacturing startups. By expanding eligibility and increasing benefits, these changes aim to transform Canada into a hub for manufacturing innovation, particularly as global supply chains undergo rapid shifts.
## Expanded Support for Hard Tech
The SR&ED program, Canada’s largest federal R&D support initiative, returned over $4.5 billion to more than 22,000 businesses in 2025. Traditionally associated with software, the program is now broadening its scope to include tech companies with a physical R&D footprint. Enhancements include doubling the refundable credit limit and reinstating capital expenditures (capex) eligibility. Publicly traded companies can also access the program’s top benefits for the first time.
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Paul Davenport, Head of Content at Boast, a Canadian R&D tax credit platform, highlights the importance of these changes. “If you have this funding, you can really dig into doing even more investigation. Canada wants to make it so that you don’t have to be so risk-averse,” he said. This shift encourages startups to undertake more ambitious projects without the fear of financial loss.
## Implications for Manufacturing and Innovation
The reintroduction of capex eligibility is particularly impactful for manufacturing and hard tech sectors, where R&D often involves significant upfront costs for materials and equipment. Companies can now claim expenses related to equipment and facilities, whether purchased or leased, marking the first such opportunity since 2014. The enhanced 35 percent refundable credit limit has increased from $3 million to $6 million, potentially returning up to $2.1 million annually to eligible companies.
Davenport notes that these changes create a “very generous opportunity” not commonly seen in other regions. For Canadian companies like Vancouver-based CTK Bio, which is developing sustainable plastics, this support could be pivotal in bringing manufacturing processes back to Canada.
## Future Prospects for Canadian Startups
The SR&ED program’s expanded reach is expected to foster a virtuous cycle of innovation, enabling more Canadian startups to experiment with new technologies. Companies integrating robotic systems or developing novel materials can now access crucial funding, provided they solve unique challenges and document their processes rigorously.
Boast, which has helped over 2,000 businesses secure an estimated $625 million in R&D credits, plays a vital role in navigating these opportunities. By combining AI with tax and technical expertise, Boast streamlines the claim process, saving companies significant time and effort.
As Canada positions itself as a leader in manufacturing innovation, these SR&ED changes could be a catalyst for growth, enabling startups to compete on a global stage while strengthening domestic supply chains. The focus on supporting tangible, high-risk R&D projects aligns with broader economic goals, potentially reshaping the landscape of Canadian technology and manufacturing industries.
