If you're building a tech company in Ontario or Quebec, you've probably heard both acronyms thrown around — usually by an accountant, a fellow founder, or a bookkeeper who mentioned it in passing and moved on before you could ask a follow-up question. SR&ED and IRAP are Canada's two biggest government funding programs for early-stage innovation, and they get confused constantly because they overlap in spirit but work very differently in practice.
Here's the short version: SR&ED is a tax credit. IRAP is a grant. That one distinction drives almost every other difference between them.
The quick comparison
| SR&ED | IRAP | |
|---|---|---|
| What it is | A refundable/non-refundable tax credit | A direct cash grant |
| Administered by | Canada Revenue Agency (CRA) | National Research Council (NRC) |
| When you apply | After your fiscal year ends, as part of your tax filing | Before the work starts — pre-approval required |
| When you get paid | Months after filing, once CRA processes the claim | Reimbursed periodically as eligible costs are incurred |
| What it covers | R&D wages, some overhead, contractor costs tied to eligible work | Primarily wages for approved technical projects |
| Revenue requirement | None — pre-revenue startups qualify | None, but you generally need an assigned Industrial Technology Advisor (ITA) |
| Approval process | Self-assessed, then reviewed/audited by CRA after the fact | Reviewed and approved by an ITA before funding begins |
| Relationship to each other | Can generally be claimed alongside IRAP, with adjustments to avoid double-dipping on the same costs | Same |
The distinction founders miss most often
SR&ED is retroactive. IRAP is prospective.
With SR&ED, you're claiming credit for technical work you've already done — the experimentation, the failed approaches, the uncertainty you worked through to build your product. You don't need anyone's permission to do the work; you just need to document it properly so the claim holds up.
With IRAP, the order is reversed. You need an Industrial Technology Advisor to review and approve your project before you start, and funding is tied to that specific, pre-approved scope of work. If you've already built the thing you wanted funding for, IRAP generally can't help — that door closes once the work is done.
This is why the two programs pair well together rather than compete: IRAP can fund a specific upcoming technical project, while SR&ED captures the broader R&D activity happening across your business, including work IRAP never touched.
Why this matters for pre-revenue founders specifically
The single most common misconception we hear — from founders and, honestly, from some of their advisors too — is "we're too early for this, we don't have revenue yet."
Neither program cares about revenue. Both are built around technical uncertainty and experimentation, which is exactly what pre-revenue, product-building startups are doing most of. If your team spent the last two quarters figuring out how to make something work that hadn't been done before — architecture decisions that failed, approaches you abandoned, technical problems you had to solve without knowing the answer going in — that's the substance both programs are designed to fund.
The practical starting point
- If you're about to start a defined technical project and want funding lined up before you begin, look at IRAP first — but budget time for the ITA review and approval process, since it isn't instant.
- If you're already deep in development and haven't been tracking this formally, SR&ED is almost certainly leaving money on the table — the work already happened, you just need to document and claim it.
- If you're doing both — ongoing R&D plus a specific upcoming project — it's worth having someone look at how to structure both claims so they complement rather than overlap.
The biggest risk with either program isn't ineligibility — it's founders assuming they don't qualify and never finding out otherwise. Both programs are more generous, and more accessible to early-stage companies, than most founders assume.
Stratapath Consulting works with SMB tech companies across Ontario and Quebec to identify, document, and claim government funding they're often not aware they qualify for. If you're not sure where your company stands on SR&ED or IRAP eligibility, that's exactly the conversation worth having before your next fiscal year-end — not after.