R&D Funding
Private industry engaged in product design and prototypes that may have application to the military are evaluated under the SR&ED program by the same criteria that would be applied to any other R&D development in any other industry. No specific exclusion exists in the SR&ED definition within the Income Tax Act.

Clear documentation from the outset of any potential military product design or application development would likely be in the areas of performance requirements, anticipated challenges, work undertaken, project progress towards technological goals, and ultimate testing against requirements. Such documentation can be definitive in defending eligibility under the SR&ED program.

However, the terms and conditions of the development would have to be carefully evaluated; any financial support from or involvement by Canadian governments (such as military grants or other R&D funding) may have an impact. Correspondingly, if your company is involved in such an undertaking, it is advisable that thorough documentation of all project aspects, not only those required by the customer, is made. For example, any prototype engineering and the progress of prototype testing, can involve a substantial portion of the project costs and yet be most challenging to defend for SR&ED purposes.

TSGI Experience
TSGI, located in Calgary, Alberta, Canada has filed SR&ED claims potentially related to military applications.