Fueling innovation in food and beverage: Unlocking the potential of SR&ED tax credits

Driving innovation and setting your business apart in Canada’s food and beverage industry has long been an expensive and time-consuming endeavour. As competition in the sector grows, economic uncertainty persists, and consumer needs evolve, food and beverage businesses are eager, but sometimes unable, to dedicate resources to R&D efforts.

The federal government supports innovation in the food and beverage sector with the Scientific Research and Experimental Development (SR&ED) tax credit incentive program. Administered by the Canada Revenue Agency (CRA), the program gives tax incentives to businesses conducting eligible R&D in the form of a cash refund or non-refundable tax credit depending on the company’s size, ownership structure, and annual R&D spending.

From April 1, 2024, to March 31, 2025, the CRA gave out more than $4 billion in investment tax credits to the nearly 23,000 successful applicants for the program. With the SR&ED program, reducing financial risk and sparking innovation go hand in hand to give food and beverage businesses the opportunity to grow sustainably and stay ahead of the competition.

What kind of projects qualify for SR&ED?

Food and beverage businesses may be already conducting SR&ED eligible R&D work but are unaware of the opportunity to claim SR&ED tax incentives.

To qualify for the SR&ED tax incentive program, businesses must work to overcome a gap in scientific knowledge or a technological limitation. Your project may be SR&ED eligible if:  

• Existing industry solutions do not work or there is no available solution to your challenge in the public domain
• Testing, experimentation, and analysis are needed to develop a new or improved product or process
• Hypotheses are systematically tested using a structured scientific approach
• Experiments involve non-standard ingredients or are outside typical parameters
• The project is undertaken to generate new knowledge, technology, or capabilities

Key SR&ED eligible activities include formulating hypotheses, developing methodology, experimentation, data collection, testing, analysis, and engineering.

Some R&D projects may not be eligible if they involve only typically used ingredients, processing methods, and standard testing. Ineligible projects might include testing new flavours for an existing product or purchasing and testing new equipment for typical use would not qualify. Some other areas that are not SR&ED eligible include ingredient sourcing, market research, consumer acceptability, optimization, troubleshooting, standard quality control and quality assurance testing, regulatory compliance, and routine data collection.

Project examples that would be eligible include:

• Experimenting to better understand how various factors effect processing and production
• Testing and modeling how different variables interact in novel applications
• Characterizing new ingredients or ingredients used in non-standard ways
• Evaluating novel solutions to production, processing, and formulation challenges

How we can help

SR&ED is not just for high-tech labs; No matter the size of your food and beverage business, you may be able to access these valuable tax incentives for product development and process improvement in food manufacturing.

At MNP, our team of experts understand the nuances of and complexities of applying for SR&ED incentives in the food and beverage industry.

By helping you identify eligible projects, drafting technical narratives, calculating investment tax credits, filing claims with the CRA, and supporting any of their reviews or audits, MNP can help ensure you’re well informed of your options and support you in your decisions moving forward.

Contact your local advisor to learn more about the opportunities for your business and get started today, with support.