Canada: Penalties | Research Credit Integrity Alliance

Canada has one penalty written specifically for SR&ED claims and several general penalties in the Income Tax Act that can apply to a claim. Some fall on the claimant, some on a claim preparer or adviser, and one on both together. This page sets out the text of each, who it applies to, and the defenses the Act provides. It describes the law only; whether a penalty applies in a particular case depends on the facts.

Summary

Provision	Who	Trigger	Amount
Subsection 162(5.1)	Claimant and claim preparer, jointly and severally	False statement or omission in claim preparer information on Form T661	$1,0001
Subsection 163(2)	Any person, including the claimant	False statement or omission in a return or form, made knowingly or in circumstances amounting to gross negligence	Greater of $100 and 50 percent of the amounts set out in the subsection2
Subsections 163.2(2) and (3)	A person who makes or furnishes a false statement that could be used by another person	Knowledge, or culpable conduct	$1,000, or for planning or valuation activities the greater of $1,000 and the person's gross entitlements3
Subsections 163.2(4) and (5)	A person who makes or participates in a false statement to or on behalf of another person	Knowledge, or culpable conduct	Greater of $1,000 and a capped amount linked to the other person's penalty3
Section 239	Any person	Criminal offences, including claiming a credit by a false or deceptive statement	Fines and imprisonment set out in the section4

Consequences that are not penalties

Before any penalty, the Act limits the claim itself. If the prescribed information about an expenditure is not contained in Form T661, no deduction may be claimed for that expenditure, and if the form is not filed by the deadline in subsection 37(11), the expenditure is deemed not to be an SR&ED expenditure.5 The CRA's review guide states that a lack of supporting information could result in the partial or full disallowance of a claim.6 These are reductions of the claim rather than penalties. See claim integrity measures.

The claim preparer information penalty

Subsection 162(5.1) applies to every person or partnership who makes, or participates in, assents to or acquiesces in the making of, a false statement or omission in respect of claim preparer information required in an SR&ED form. That person is jointly and severally, or solidarily, liable, together with any claim preparer of the form, to a penalty of $1,000.1 A claim preparer is not liable if it exercised the degree of care, diligence and skill to prevent the false statement or omission that a reasonably prudent person would have exercised in comparable circumstances.1 The CRA's guide to Form T661 states that the penalty may be assessed in respect of each SR&ED claim for which the prescribed preparer information is missing, incomplete or inaccurate.7 The claim preparer information penalty page sets out the detail.

The gross negligence penalty

Subsection 163(2) applies to every person who, knowingly or under circumstances amounting to gross negligence, has made or has participated in, assented to or acquiesced in the making of, a false statement or omission in a return, form, certificate, statement or answer filed or made for the purposes of the Act.2 The penalty is the greater of $100 and 50 percent of the total of several amounts listed in the subsection. These include the understatement of tax attributable to the false statement or omission and, in paragraph (d), the amount by which the refundable investment tax credit deemed paid under subsection 127.1(1) would exceed the correct amount if it were calculated using the information provided.2

In an appeal where a penalty under section 163 or 163.2 is in issue, subsection 163(3) places the burden of establishing the facts justifying the penalty on the Minister.2

Third party penalties

Section 163.2 contains two penalties aimed at people who make false statements that another person could use for a purpose of the Act. Both turn on whether the person knew, or would reasonably be expected to know but for circumstances amounting to culpable conduct, that the statement was false.3 Culpable conduct means conduct, whether an act or a failure to act, that is tantamount to intentional conduct, shows an indifference as to whether the Act is complied with, or shows a wilful, reckless or wanton disregard of the law.3

Planner penalty. Under subsection 163.2(2), a person who makes or furnishes, participates in making, or causes another person to make or furnish such a statement is liable to a penalty.3 Under subsection 163.2(3), the penalty is $1,000, or, where the statement is made in the course of a planning activity or a valuation activity, the greater of $1,000 and the person's gross entitlements in respect of that activity.3
Preparer penalty. Under subsection 163.2(4), a person who makes, or participates in, assents to or acquiesces in the making of, such a statement to, or by or on behalf of, another person is liable to a penalty.3 Under subsection 163.2(5), the penalty is the greater of $1,000 and the lesser of the penalty the other person would face under subsection 163(2) and the total of $100,000 and the person's gross compensation in respect of the false statement.3

The Act defines gross compensation as all amounts to which the person, or a person not dealing at arm's length with them, is entitled, either before or after that time and either absolutely or contingently, to receive or obtain in respect of the statement.3 Gross entitlements are defined in the same terms for planning and valuation activities.3

Section 163.2 also contains limits. An adviser acting on behalf of another person is not treated as having engaged in culpable conduct solely because the adviser relied in good faith on information provided by or on behalf of that person, or because of that reliance failed to verify, investigate or correct the information.3 A person is not treated as having made a false statement solely because they provided clerical services (other than bookkeeping services) or secretarial services.3 A person liable under both subsections (2) and (4) for the same statement pays no more than the greater of the two totals.3

No CRA publication or Tax Court decision applying section 163.2 to an SR&ED claim was identified in the sources reviewed for this page.

Criminal offences

Subsection 239(1.1) makes it an offence to obtain or claim a refund or credit to which a person is not entitled, or a greater amount than the entitlement, by making, or participating in, assenting to or acquiescing in the making of, a false or deceptive statement, among other means.4 On summary conviction the person is liable, in addition to any other penalty, to a fine of not less than 50 percent and not more than 200 percent of the excess refund or credit, or to both that fine and imprisonment for up to 2 years.4 If the Attorney General elects to proceed on indictment, the fine is not less than 100 percent and not more than 200 percent of that excess, and the term of imprisonment is up to 5 years.4

Relief and correction

Subsection 220(3.1) allows the Minister, on or before the day that is ten calendar years after the end of a taxation year, to waive or cancel all or any portion of a penalty or interest otherwise payable for that year, on the Minister's own initiative or on application.8

The CRA has stated that all claimants are legally responsible for the accuracy of the information in their claims and will be held liable for any false information, including where a third party assists with the claim.9 It has also said that inadvertent errors or omissions can occur, that claimants in that position should contact the SR&ED program, and that the Voluntary Disclosures Program grants relief on a case by case basis to those who come forward before the CRA knows of or contacts them about the errors or omissions.9 The CRA's review guide adds that the Part 10 certification cannot be revoked once a claim is selected for review, and that incorrect information can lead to penalties and processing delays.6

Challenging a penalty

Subsection 152(4) allows the Minister to make an assessment of tax, interest or penalties payable under Part I of the Act, which contains the provisions above other than section 239.10 Subsection 165(1) allows a taxpayer who objects to an assessment under that Part to serve a notice of objection, and subsection 169(1) then allows an appeal to the Tax Court of Canada.1112 See disputes and appeals.

Sources

Government of Canada, Income Tax Act, RSC 1985, c 1 (5th Supp), subsections 162(5.1), (5.2) and (5.3). https://laws-lois.justice.gc.ca/eng/acts/I-3.3/section-162.html (accessed 11 October 2026). Back
Government of Canada, Income Tax Act, RSC 1985, c 1 (5th Supp), subsections 163(2), including paragraph (d), and 163(3). https://laws-lois.justice.gc.ca/eng/acts/I-3.3/section-163.html (accessed 11 October 2026). Back
Government of Canada, Income Tax Act, RSC 1985, c 1 (5th Supp), section 163.2, subsection 163.2(1) (definitions of "culpable conduct", "gross compensation" and "gross entitlements") and subsections 163.2(2) to (6), (9) and (14). https://laws-lois.justice.gc.ca/eng/acts/I-3.3/section-163.2.html (accessed 11 October 2026). Back
Government of Canada, Income Tax Act, RSC 1985, c 1 (5th Supp), subsections 239(1.1) and (2). https://laws-lois.justice.gc.ca/eng/acts/I-3.3/section-239.html (accessed 11 October 2026). Back
Government of Canada, Income Tax Act, RSC 1985, c 1 (5th Supp), subsections 37(11), (11.1) and (12). https://laws-lois.justice.gc.ca/eng/acts/I-3.3/section-37.html (accessed 11 October 2026). Back
Canada Revenue Agency, The SR&ED Review Process: A Guide for Claimants (April 20, 2026), section "Can you withdraw your claim after it has been selected for review" and Appendix A. https://www.canada.ca/en/revenue-agency/services/scientific-research-experimental-development-tax-incentive-program/technical-review-a-guide-claimants.html (accessed 11 October 2026). Back
Canada Revenue Agency, T4088, Guide to Form T661 (T4088(E) Rev. 20), Part 9, Claim preparer information. https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/t4088/guide-form-t661-scientific-research-experimental-development-expenditures-claim-guide-form-t661.html (accessed 11 October 2026). Back
Government of Canada, Income Tax Act, RSC 1985, c 1 (5th Supp), subsection 220(3.1). https://laws-lois.justice.gc.ca/eng/acts/I-3.3/section-220.html (accessed 11 October 2026). Back
Canada Revenue Agency, Advisory for businesses claiming SR&ED investment tax credits (tax tip, October 12, 2022). https://www.canada.ca/en/revenue-agency/news/newsroom/tax-tips/tax-tips-2022/advisory-businesses-claiming-sred-investment-tax-credits.html (accessed 11 October 2026). Back
Government of Canada, Income Tax Act, RSC 1985, c 1 (5th Supp), subsection 152(4). https://laws-lois.justice.gc.ca/eng/acts/I-3.3/section-152.html (accessed 11 October 2026). Back
Government of Canada, Income Tax Act, RSC 1985, c 1 (5th Supp), subsection 165(1). https://laws-lois.justice.gc.ca/eng/acts/I-3.3/section-165.html (accessed 11 October 2026). Back
Government of Canada, Income Tax Act, RSC 1985, c 1 (5th Supp), subsection 169(1). https://laws-lois.justice.gc.ca/eng/acts/I-3.3/section-169.html (accessed 11 October 2026). Back