An Industry Built on Science That Doesn’t Claim Science Credits

Canada has nearly 1,200 craft breweries [1] and over 300 craft distilleries [2]. Together they employ more than 30,000 people and contribute $1.7 billion to GDP [1].

Every one of these businesses runs experiments. Adjusting fermentation temperatures, testing yeast strains, figuring out why a batch tastes wrong and how to fix it. They call it recipe development. CRA has a different name for it.

Food processing accounts for 1.5% of all SR&ED investment tax credits [3]. Software development accounts for 40.8%. The craft beverage industry, an industry where the core work is literally experimental, barely registers in the program.

That gap is not because the work doesn’t qualify. It’s because nobody in the industry thinks to ask.

The Word “Craft” Is Costing the Industry Millions

Brewers and distillers think of themselves as artisans. The language reinforces it. Craft beer. Small batch. Handcrafted spirits. The whole identity is built around the idea that this is art, not science.

But walk through what actually happens in a brewhouse on any given week. A brewer adjusts the mash temperature for a new grain bill because the conversion efficiency is unknown. The first batch underattenuates. The second batch throws diacetyl. They change the pitch rate, adjust the fermentation profile, try a different yeast strain. Three batches in, they still don’t know if this recipe will produce what they intended.

That is systematic investigation of technological uncertainty. It meets every criterion CRA uses to evaluate SR&ED eligibility [4]. The brewer just doesn’t know that, because nobody in their world uses those words.

Distillers face the same problem with different variables. Aging experiments where the interaction between spirit, wood char level, and warehouse conditions produces unpredictable results over months or years. Still modifications that change the cut points between heads, hearts, and tails in ways that can’t be predicted from published literature. Wash fermentation where grain-to-spirit conversion rates don’t match what the numbers say they should.

None of this looks like “R&D” to the people doing it. All of it looks like R&D to CRA.

Where the Line Actually Is

Not everything a brewery does qualifies. This distinction matters, and most generic advice about SR&ED for food companies skips it entirely.

Work that qualifies involves genuine uncertainty about whether an approach will produce the intended result, investigated through systematic trial.

A brewery developing a new fermentation process to reduce diacetyl without extending conditioning time. The outcome isn’t known. Standard procedures don’t solve it. They form a hypothesis, test it, measure the result, adjust. That’s SR&ED.

A distillery experimenting with non-traditional barrel types where the interaction between spirit composition and wood chemistry has no published precedent. The aging timeline is unknown. The flavor profile is unpredictable. Every barrel is a data point. That qualifies.

Scaling a 10-hectolitre test batch to 100 hectolitres when the fermentation kinetics don’t scale linearly. The water chemistry is different at volume. Temperature management changes. Yeast behavior shifts. The pilot recipe doesn’t translate, and figuring out why requires investigation. That qualifies.

Work that does not qualify is routine production with predictable outcomes.

Brewing an IPA you’ve brewed 200 times using an established recipe. Substituting one hop variety for another when the outcome is predictable based on known characteristics. Running standard quality control tests on finished product. Following a published recipe from a supplier or homebrew scaling guide. All routine. None of it SR&ED.

The Tax Court of Canada confirmed this distinction in Canafric Inc. v. The King (2023), where developing new food products to meet specific technical targets (shelf life, ingredient constraints, product integrity) was ruled eligible for SR&ED [5]. The court found that each project involved technological uncertainties beyond routine methods. A more recent decision, Biscuiterie Dominic Inc. v. The King (2024), clarified that food science claims need to emphasize the uncertainties around ingredient interactions and include quantifiable metrics from the experimentation [6].

The courts are saying what the industry needs to hear: recipe development can be SR&ED. But only when the outcome is genuinely uncertain and the investigation is systematic.

The Consultant Problem

Here is the part nobody talks about. Most SR&ED consultants don’t understand brewing.

They’ll interview your head brewer for an hour, write the claim in generic technical language, and file a T661 that reads like it was written about a software company with the nouns swapped out. When a Research and Technology Advisor shows up to review the claim and walks through your brewhouse, the narrative in the filing won’t match what they see. That disconnect is where claims get reduced.

The irony is that brewers and distillers often have better raw documentation than tech companies. Batch logs with gravity readings at every stage. Temperature curves recorded by automated systems. Tasting notes with sensory data. Photos of failed batches. Brewhouse management software tracking every variable across every batch.

This is contemporaneous technical documentation. It was created during the work, not reconstructed afterward. CRA values that kind of evidence more than polished narratives written months later [4]. The problem is translation: converting brewhouse records into the language of technological uncertainty, systematic investigation, and advancement. Most advisors can’t do that because they don’t know what attenuation means, let alone why unexpected attenuation in a specific fermentation represents genuine uncertainty.

What This Is Actually Worth

A mid-size craft brewery with 10 to 20 employees running 2 to 3 genuinely experimental projects per year might have $150,000 to $300,000 in eligible SR&ED expenditures. At the enhanced CCPC credit rate of 35% on the first $4.5 million [7], that translates to roughly $50,000 to $105,000 back as a refundable tax credit. Cash, not a deduction.

For a brewery operating on thin margins, that’s meaningful. It’s not six figures of found money that someone oversold you on. It’s a real, defensible credit for work you’re already doing.

The agriculture sector, where most brewery and distillery claims would be categorized, has a 24.66% modification rate [3]. That’s nearly 1 in 4 claimed dollars adjusted by CRA. It’s one of the highest rates of any industry. Strong documentation and accurate framing are not optional here. They’re the difference between getting the credit and getting a letter from CRA explaining why your claim was reduced.

Does Your Brewery Qualify?

If you’re solving fermentation problems where the answer isn’t in a textbook, testing approaches because you genuinely don’t know what will work, and keeping records of what you tried and what happened, you’re probably doing SR&ED-eligible work.

The program wasn’t built for software companies. It was built for experimental development, wherever it happens. It happens in brewhouses and distilleries across this country every single day.

Take our readiness check to find out if your work qualifies. It takes five minutes.

References

[1] Canadian Craft Brewers Association, “About CCBA.” [Online]. Available: https://ccba-ambc.org/about/

[2] Artisan Distillers Canada, “About ADC.” [Online]. Available: https://artisandistillers.ca/

[3] Canada Revenue Agency, “SR&ED Tax Incentive Program: Annual Program Statistics.” [Online]. Available: https://www.canada.ca/en/revenue-agency/services/scientific-research-experimental-development-tax-incentive-program/annual-program-statistics.html

[4] Canada Revenue Agency, “Guidelines on Eligibility of Work for SR&ED Tax Incentives.” [Online]. Available: https://www.canada.ca/en/revenue-agency/services/scientific-research-experimental-development-tax-incentive-program/sred-policies-guidelines/guidelines-eligibility-work-sred-tax-incentives.html

[5] Tax Court of Canada, Canafric Inc. v. The King, 2023 TCC. [Online]. Available: https://www.canadian-accountant.com/content/practice/canafric-inc-v-the-king

[6] Ryan, “Court Case Clarifies SR&ED Eligibility Criteria for a Food Sciences Claim.” [Online]. Available: https://funding.ryan.com/blog/government-funding/landmark-sred-court-case-tax-credit-eligibility/

[7] Canada Revenue Agency, “SR&ED Investment Tax Credit Policy.” [Online]. Available: https://www.canada.ca/en/revenue-agency/services/scientific-research-experimental-development-tax-incentive-program/investment-tax-credit-policy.html