Key Takeaway
Automating R&D time categorization captures more eligible work and produces an audit trail tied to real artifacts, which is what separates a claim that holds from one that gets adjusted.
Two companies do identical R&D. One gets the full credit. The other loses 30% in review. The difference is almost never the work. It’s whether the records were made while the work happened or reconstructed afterward.
This article covers seven practices for categorizing R&D time, what each one protects you from, and which parts are worth automating.
Why does time categorization decide the outcome?
Because the SR&ED claim is a claim about hours. You’re telling the CRA that specific people spent specific time resolving specific technological uncertainties. Categorization is how you prove which hours those were.
Get it right and three things follow.
You claim what you earned. Eligible work that nobody categorized doesn’t make it into the filing. That’s the most common way companies underclaim, and it’s invisible, because you can’t miss what you never counted.
Reviews resolve faster. When a reviewer asks where a number came from, you either have an answer or you have a problem. Categorized hours tied to dated artifacts are an answer.
You find out where the engineering budget went. That’s a side effect, but finance teams tend to care about it more than the credit by year two.
Seven practices that work
1. Document the problem, not just the hours
A timesheet that says “40 hours, Project Atlas” proves nothing. What the CRA needs is the technical shape of the work.
Record the objective and the hypothesis. Record what you tried, what happened, and what you tried next. Record who did it. The failed attempts matter most, because a dead end is the clearest evidence that the outcome was uncertain.
2. Stop tracking manually
Manual entry fails in a specific way: people fill it in at the end of the month, from memory, and the numbers drift 20-40% from reality. Engineers know it’s fiction, which is why they resent doing it.
Use a system that logs in real time, categorizes by activity, connects to the tools your team already uses, and produces reports you can hand to an accountant without a rebuild.
3. Define your categories once
Pick categories that map to SR&ED eligibility criteria, not to your org chart. Then hold them still.
Categories that drift mid-year make your data uncomparable across quarters and force someone to normalize it at filing time. Write the definitions down. Review them quarterly. Change them at year boundaries or not at all.
4. Teach the team what qualifies
Your engineers generate the data. If they can’t tell eligible work from routine work, the categorization is wrong at the source and no amount of downstream cleanup fixes it.
They need four things: what technological uncertainty actually means, how to categorize their own work, why logging close to the work matters, and what the documentation is eventually for. An hour of training pays for itself in one filing.
5. Automate the categorization itself
This is the practice that changes the economics. Systems that read your git history, pull requests and ticket entries can categorize activity from artifacts your team already produces, flag likely misclassifications, and generate audit-ready reports.
Nobody fills in a form. The evidence was already there, and it’s dated.
6. Review quarterly, not in March
Waiting until filing season guarantees you’re reconstructing. Run a review every month or quarter instead.
Look for miscategorized entries, eligible work that never got logged, and gaps between what the project documentation says and what the time data says. Fixing a January error in April is easy. Fixing it the following March is archaeology.
7. Track the rules, not just the hours
SR&ED rules move. Eligibility criteria, documentation requirements and CRA interpretations all shift, and court decisions change how existing rules get applied.
In DAZZM Inc. v. The King, 2024 TCC 129, the Tax Court denied a SR&ED claim partly because the documentation had been substantially reconstructed after the fact. The work wasn’t the problem. The records were.
What should you automate first?
Categorization, before anything else. It’s the step with the worst manual accuracy and the highest claim impact.
Chrono R&D reads the systems your engineers already work in and categorizes activity from what’s there. Every categorized hour traces back to a commit, a pull request or a ticket with a date on it. When a reviewer asks where a number came from, the answer is a specific artifact rather than a recollection.
The reporting comes out in a form an accountant can file, and it scales the same way whether you have six engineers or six hundred.
Frequently Asked Questions
What counts as eligible R&D activity for time categorization?
Experimental development, applied research, and work resolving technological uncertainty through systematic investigation. Routine testing, quality control and market research don’t qualify. What matters is documenting the technical challenge, not the hours on their own.
How often should R&D time be logged?
Daily or weekly. Records created while the work is happening are far more defensible than time reconstructed months later. The CRA expects contemporaneous documentation, and since the Pre-Claim Approval program launched in April 2026, it defines the term explicitly.
What’s the biggest mistake companies make with R&D time tracking?
Tracking in spreadsheets with no structure behind them. The hours exist but nothing connects them to a specific qualifying activity, so the claim can’t be defended line by line. Not tracking at all is worse but less common.
Want to see what your repository already proves about last year’s R&D? Talk to our team and we’ll run it against your claim.