Physicians often participate in research while also delivering patient care, working through a medical professional corporation and collaborating with hospitals, universities, research networks or sponsors. That creates two separate SR&ED questions: does the work qualify, and which legal person is entitled to claim it?
Key Takeaways
- Medical research may qualify when it seeks a scientific advancement through systematic experiment or analysis. Routine patient care, standard protocol use and routine data collection do not qualify merely because they occur in a clinical setting.
- The claimant must be identified correctly. A physician and a medical professional corporation are separate taxpayers, and the contracts, funding and employment relationships matter.
- Where an MPC directly undertakes and funds eligible work performed by physician-employees, the MPC may claim reasonable salary or wages based on the time spent on the research.
- A clinical trial is not automatically a valuable SR&ED claim. Sponsor payments, hospital arrangements and other assistance may reduce the qualified expenditures, sometimes substantially.
Medical Research Can Qualify – But the Structure Matters
The CRA recognizes that medical research generally contributes to new discoveries and advances in medical knowledge. However, its guidance for physicians and medical professional corporations emphasizes that collaboration can make it difficult to determine who performed the work, who funded it and who is entitled to claim.
This distinction matters in Ontario practices where a physician may bill through an MPC, hold a hospital appointment personally, receive research funding through a separate entity, and perform work with hospital staff. The scientific project may be strong, but the tax claim can still fail if the wrong claimant is used or the expenditure trail does not match the agreements.
What Makes Physician Research Eligible for SR&ED?
The eligibility test is the same across industries. The work must be carried out in Canada to advance scientific knowledge or achieve technological advancement, and it must use a systematic investigation or search through experiment or analysis.
Scientific uncertainty
The project should begin with a limitation in the available medical or scientific knowledge. A question is not a scientific uncertainty merely because the answer is unknown to the physician or difficult to locate. The existing knowledge base must be insufficient to determine whether or how the intended result can be achieved.
Hypothesis-driven work
Eligible work normally includes a clearly defined problem, one or more hypotheses, planned testing or analysis, observations and reasoned conclusions. The approach can evolve as results are obtained. Negative or inconclusive results may still produce eligible knowledge when they narrow the possible explanations or show why an approach did not work.
Advancement in medical knowledge
The advancement is the new knowledge gained through the work, not the number of patients enrolled, the revenue generated, the novelty of the clinic service or the fact that a paper was published. Publication and peer review may be good evidence, but they are not mandatory and do not replace the eligibility analysis.
Examples in Rheumatology and Gynaecology
The following examples show where potentially eligible research may arise. Each project must be evaluated on its own facts, and all clinical, privacy, ethics and professional requirements remain separate from the tax analysis.
Rheumatology example: treatment-response stratification
A rheumatology team may be uncertain whether a defined combination of biomarkers, imaging findings and patient characteristics can reliably predict response or adverse effects for a subgroup whose outcomes are not adequately explained by existing models. Potentially eligible work could include developing a hypothesis, defining a research-specific cohort, testing the model, analyzing deviations and refining the approach based on results.
By contrast, applying an established treatment pathway, conducting routine chart review or compiling outcomes solely for quality reporting would generally not be enough. Data collection must directly support the eligible investigation rather than ordinary clinical operations.
Gynaecology example: diagnostic or procedural limitation
A gynaecology practice may investigate whether a modified diagnostic protocol, device configuration or procedural technique can overcome a documented limitation in detection, reproducibility, tissue response or recovery for a defined patient population. The work becomes more credible as SR&ED when the team can state why established methods were insufficient, what scientific relationship it proposed, which variables it controlled, how it analyzed outcomes and what it learned from each protocol revision.
Adopting a published protocol, comparing routine service metrics or adjusting scheduling and patient flow would normally be clinical or business improvement rather than SR&ED.
Why a Clinical Trial Is Not Automatically an SR&ED Claim
Clinical research may meet the technical eligibility requirements, but the potential claimant still needs eligible expenditures. A physician who follows a sponsor-designed protocol may be performing SR&ED on behalf of the sponsor or another health care entity. If the physician or MPC is compensated for that work, contract-payment or assistance rules may reduce the qualified expenditure base.
It is therefore important to separate two analyses:
- Technical eligibility: Did the work seek scientific advancement through systematic experiment or analysis?
- Financial and legal entitlement: Which taxpayer undertook the work, incurred the expenditures, controlled or was obligated to perform the research, and received related funding or compensation?
A technically strong project can produce a small or nil credit for a particular performer if its costs were fully reimbursed. Conversely, the presence of sponsor funding does not automatically mean there is no claim; the agreements and payment flows must be analyzed.
Who Claims: The Physician or the MPC?
- MPC directly undertakes and funds the research. If the MPC carries on the research for itself and its physician-employees perform the work, the MPC may claim eligible expenditures, including reasonable salary or wages based on the time the employees spent on the claimed research.
- MPC performs research for another party. If the MPC is named in the research or service agreement and its physician-employees perform the work, the MPC may be the claimant. Assistance and contract-payment reductions may apply.
- Physician is named personally. If only the physician is contractually identified as the performer, the physician may be the claimant rather than the MPC, even if the physician owns an MPC. The legal relationship should not be inferred from billing habits alone.
- Physician operates as an unincorporated independent contractor. The physician may claim eligible costs incurred in the business, including qualifying salaries and benefits paid to employees. The physician cannot create a qualifying salary expense for their own work through proprietor drawings.
In each case, written agreements should identify the research obligations, funding, entity performing the work and basis of compensation. Ontario professional and hospital rules may affect which entity can enter into an agreement, so legal advice may also be required.
A Critical Compensation Issue for Incorporated Physicians
| Common trap: An MPC cannot claim a physician-owner’s time as salary or wages if the corporation did not incur and pay salary or wages for that work. Dividends are not converted into salary simply because the owner performed eligible research. |
Where the physician is an employee of the MPC, only the reasonable portion of salary or wages related to eligible work should be claimed, subject to the detailed rules for specified employees and the expenditure method selected. Time records and the compensation structure should agree with the corporate books, payroll filings and research agreements.
What Expenditures May Be Available?
Potential SR&ED expenditures for a physician or MPC can include:
- Reasonable salary or wages for physician-employees based on time spent directly engaged in the eligible work.
- Salary or wages for research coordinators, nurses, technicians, data analysts or other employees to the extent their work meets the applicable SR&ED expenditure rules.
- Materials consumed or transformed in the research and qualifying contract expenditures for work performed on the claimant’s behalf.
- Certain overhead expenditures under the traditional method, or the prescribed proxy amount under the proxy method, as applicable.
- Certain equipment lease costs and qualifying capital expenditures under the rules applying to amounts incurred or property acquired after December 15, 2024.
Routine patient-care costs, general clinic overhead and administrative effort are not included merely because the research occurred in the clinic. The claimed costs must be permitted by the expenditure rules and tied to the eligible work. Government assistance, sponsor payments and other compensation must also be considered.
How Valuable Can the Credit Be?
The federal basic ITC rate is 15% of qualified SR&ED expenditures. Most CCPCs may earn an enhanced, refundable 35% credit on qualified expenditures up to their available expenditure limit. For tax years beginning after December 15, 2024, the maximum expenditure limit is $6 million, subject to corporate-status, association, taxable-capital, refundability and other rules. Ontario research and development tax credits may also apply.
The expected credit should be calculated from the actual salary, funding and contract structure. For a physician practice, the difference between salary and dividends, the identity named in the research agreement, and the amount reimbursed by a sponsor can materially affect the result.
Documentation Physicians and MPCs Should Keep
The CRA states that records created when the work is performed are the best evidence. A physician claim should combine scientific records, relationship documents and financial support. Useful records may include:
- Research plans, protocol versions, the scientific uncertainty, hypotheses, defined variables and analysis methods.
- Research-specific inclusion and exclusion criteria, de-identified data extracts, statistical outputs, deviations, adverse observations and conclusions.
- Meeting notes, correspondence, manuscript drafts, posters or reports that show how the investigation developed. Publication is helpful evidence but is not required.
- Time records for the physician and each participating employee, distinguishing research from patient care, administration, teaching and routine data entry.
- Employment agreements, hospital appointments, sponsor agreements, research contracts, corporate resolutions and documents showing which entity paid each cost and received each payment.
- Payroll records, invoices, proof of payment and a reconciliation from the claimed expenditures to the accounting records.
Tax working papers should use de-identified information wherever patient identity is not required. The SR&ED file should explain the scientific work without unnecessarily reproducing personal health information.
Timing and the New Pre-Claim Approval Option
A corporation’s SR&ED reporting deadline is generally 12 months after its T2 filing due date, usually 18 months after the tax year-end. For an individual carrying on a business, the deadline is generally 12 months after the T1 business-filing due date. Claims should be prepared early, while the evidence and contractual facts are clear.
For planned projects, the CRA’s optional pre-claim approval process may provide an eligibility determination within eight weeks after a complete application. It does not eliminate the need to establish the correct claimant, incur eligible expenditures or maintain documentation.
How Stratos Helps Physicians and Medical Professional Corporations
Stratos Accounting & Consulting has recent experience with physician SR&ED matters in rheumatology and gynaecology. We assess the scientific project, trace the legal and funding relationships, determine whether the physician or MPC is the appropriate claimant, reconcile salary and other costs to the books, prepare the technical and financial schedules, and support the claim through CRA review.
If your practice has participated in research, developed a non-standard protocol or investigated a clinical limitation that established knowledge could not resolve, contact Stratos for a consultation. The earlier the structure and documentation are reviewed, the easier it is to protect a legitimate claim.
Publishing note: Tax rules and administrative guidance can change. This draft reflects CRA information available on August 24, 2026 and should be reviewed before publication. Eligibility and credit amounts depend on the claimant’s facts.