What the Industrial Research Assistance Program (IRAP) Funds: Eligible Expenses Guide
The Industrial Research Assistance Program (IRAP) of the National Research Council of Canada (NRC IRAP) provides financial assistance to small and medium‑sized enterprises (SMEs) undertaking technology‑driven innovation. IRAP funding is delivered as a non‑repayable contribution to help you conduct research and development (R&D), develop prototypes, and advance commercialization. As of December 1, 2025, IRAP continues to support technology innovation projects and youth employment initiatives nationwide, with larger projects potentially accessing increased thresholds of up to $10 million, as determined by NRC IRAP for high‑growth firms.
This guide explains what IRAP funds. It outlines eligible and ineligible expenses, typical funding mechanics and percentages, documentation requirements, the claim and reimbursement process, stacking rules with other Canadian government funding, and practical budgeting tips. It is written for organizations across Canada—manufacturers, software companies, cleantech ventures, medtech innovators, and more—seeking clear, actionable details on IRAP eligible expenses.
Program Funding Overview
NRC IRAP is a federal innovation funding program supporting Canadian SMEs that are incorporated, profit‑oriented, and pursuing the development and commercialization of innovative products, processes, or services in Canada. Financial support is provided via contribution agreements that share eligible project costs. Funding is normally reimbursed monthly based on actual eligible expenditures incurred and paid during the approved project period.
Key points:
Funding model: Non‑repayable, cost‑shared contribution for R&D and closely related commercialization activities within scope.
Project scope: Activities across the innovation cycle—from applied research and prototyping to testing, validation, and pre‑commercial development—when directly tied to technology innovation.
Size of support: Standard contributions vary by project; NRC IRAP can, at its discretion, support larger, strategic projects with thresholds up to $10 million for high‑growth SMEs that meet program criteria and objectives.
Administration: Your assigned Industrial Technology Advisor (ITA) oversees eligibility, scope, and claims pursuant to the contribution agreement.
Funding Amounts & Rates
IRAP does not apply a single public rate for every project. Instead, the cost share, caps, and claimable categories are defined in your contribution agreement, reflecting project strategy, risk, and expected benefits to Canada. Typical patterns you may see include:
Labour‑centric cost share: A focus on reimbursing a negotiated share of direct, project‑related salaries and wages, plus a portion of employer‑paid statutory benefits.
Subcontractor and materials support: Cost‑sharing for specialized contractors and consumables essential to R&D, prototyping, and testing.
Defined limits: Category‑specific ceilings (for example, maximum percentages for subcontractors or materials) and overall agreement caps.
Youth employment funding: Distinct wage subsidies may be available under IRAP youth programs when in effect and approved for your project. Conditions and amounts are program‑specific and set in your agreement.
Always refer to your signed contribution agreement for the exact rates, caps, start and end dates, and any special conditions. Only costs incurred and paid within the eligible project period are typically reimbursable.
Eligible Expenses
The lists below reflect common NRC IRAP eligible cost categories for technology innovation projects. Eligibility is ultimately determined by NRC IRAP and the terms of your contribution agreement with the National Research Council of Canada.
1) Salaries and Wages (Project R&D Labour)
IRAP generally focuses on project‑specific technical labour:
Salaries and wages for engineers, scientists, developers, technologists, and other technical staff performing eligible R&D tasks.
Proportional employer contributions (e.g., CPP, EI, vacation pay) associated with eligible salaries, as defined in your agreement.
Time must be tracked to the project with verifiable timesheets and supported by payroll records.
Management time may be eligible when a senior technical leader directly contributes to R&D tasks; purely administrative or executive oversight is usually ineligible.
2) Contractors and Professional Services
Specialized external expertise directly tied to R&D may be claimable:
Independent contractors and firms providing engineering, software development, algorithm design, industrial design, testing and validation, user research for prototype usability, or certification preparation.
Scientific and technical consulting required to solve specific R&D challenges or de‑risk the technology.
Fees must be reasonable, supported by statements of work, quotes, invoices, and proof of payment.
3) Materials and Supplies
Consumables used primarily for R&D, prototyping, and testing are commonly eligible:
Prototype inputs such as electronic components, mechanical parts, test jigs, chemicals, substrates, and lab supplies consumed during experiments.
Small tools and expendables used up within the project period.
Reasonable wastage consistent with R&D activities, documented via inventory controls and usage logs.
4) Equipment Usage, Rentals, and Depreciation
IRAP generally prioritizes equipment access over capital purchases:
Short‑term equipment rentals, usage fees, or a reasonable depreciation portion for equipment used on the project may be allowable when directly tied to R&D.
External facility or lab access fees (e.g., specialized testing labs, clean rooms) used for eligible activities.
Capital purchases of equipment are often ineligible; where permitted, eligibility is limited and explicitly defined in your agreement. Always confirm with your ITA.
5) Software, Data, and Cloud Services
Digital resources directly required for project R&D may qualify:
Software licenses, development toolchains, modelling and simulation tools, CAD/EDA suites, and pay‑as‑you‑go cloud compute or storage used for the project.
Curated datasets or labelled data necessary to train or validate AI/ML models.
Allocation methodologies (e.g., per‑project tagging or metering) must substantiate the claim.
6) Testing, Trials, and Certification‑Related Costs
Activities that validate technical performance can be eligible:
Third‑party bench testing, environmental or stress testing, EMC/EMI pre‑compliance, and safety validation required to advance the technology.
Pilot trials, controlled field tests, and limited certification preparation when integral to R&D outcomes.
Fees for access to testing equipment or specialized test environments.
7) Project‑Specific Travel
Limited travel that is essential to R&D execution may be supported:
Travel by technical staff to conduct or oversee experiments, field trials, site tests, or collaboration with specialized facilities in Canada.
Travel must follow federal travel norms and be pre‑approved within your agreement. First‑class travel, per diems beyond prescribed rates, or travel primarily for sales/marketing is not eligible.
8) Training Directly Tied to the Project
Targeted training can be eligible when it is required to perform project R&D:
Short courses or vendor instruction for new tools, methods, or equipment essential to executing the approved work plan.
General corporate training (e.g., leadership, sales enablement) is not eligible.
9) Youth Employment (When Applicable)
Where IRAP youth employment initiatives are approved with your project:
Wages for eligible youth roles in technology or innovation functions may be supported for a defined period under program‑specific terms.
Deliverables and reporting for youth placements must follow the conditions set by NRC IRAP.
10) Indirect Costs and Overheads (When Allowed)
IRAP may permit a limited indirect cost allowance:
Either a negotiated flat rate or a documented, incremental overhead methodology tied to eligible R&D activities.
Typical inclusions are project‑related utilities, minor facilities costs, and other indirects explicitly allowed in your agreement.
General corporate overhead not captured by the agreed method is ineligible.
Ineligible Expenses
IRAP is focused on R&D. The following are commonly ineligible:
Sales, marketing, business development, and customer acquisition activities.
Routine operating costs (rent, utilities, office supplies) beyond any approved indirect allowance.
Capital asset purchases and long‑term equipment acquisitions, unless expressly allowed in your agreement with strict limits.
General legal and accounting fees, patent prosecution and maintenance, incorporation costs, and routine IP administration.
Entertainment, gifts, fines, penalties, and donations.
Bonuses, dividends, and discretionary executive compensation not tied to project R&D.
Taxes (e.g., GST/HST), refundable credits, and recoverable costs.
Work performed outside Canada, except limited, pre‑approved foreign subcontracting when essential and defined in your agreement.
Costs incurred before the project start date or after the end date stated in your agreement.
Expense Documentation Requirements
To remain audit‑ready and ensure smooth reimbursements, maintain:
Detailed timesheets for every R&D team member, aligned to work packages and milestones.
Payroll registers, T4/T4A summaries, and evidence of employer contributions for eligible labour.
Executed subcontractor agreements, statements of work, competitive quotes (where required), invoices, and proof of payment.
Materials purchase orders, receiving records, inventory drawdowns, and consumption logs mapped to experiments or prototypes.
Equipment usage logs, rental agreements, and depreciation calculations that show project‑specific allocation.
Software and cloud billing with project tagging, usage reports, and allocation methodologies.
Travel authorizations, itineraries, boarding passes, receipts, and per diem calculations consistent with allowed rates.
Monthly claim package: cost summaries by category, supporting documentation, technical progress updates, and milestone evidence as requested by your ITA.
Record retention: keep all source documentation for the period specified in your contribution agreement and applicable federal guidelines.
Examples of Funded Projects
IRAP supports a broad range of technology innovation projects across Canada. Examples include:
Advanced manufacturing (Ontario, Quebec, Western Canada): Designing a robotic vision system to automate defect detection on a production line; eligible costs include engineer salaries, prototype cameras and optics, contractor‑led computer vision model tuning, and bench testing.
Software and AI/ML (Waterloo Region, GTA, British Columbia): Building a privacy‑preserving federated learning platform for healthcare data; eligible costs include developer and data scientist wages, curated de‑identified datasets, cloud compute, and external security testing.
Medtech and life sciences (Montreal region, National Capital Region): Developing a Class II medical device prototype and completing pre‑compliance testing; eligible costs may include prototyping materials, biocompatibility testing by a certified lab, and technical contractor fees.
Cleantech and energy (Alberta, Atlantic Canada): Piloting a novel electrolyser stack with improved durability; eligible costs include materials for cell fabrication, third‑party accelerated life testing, and engineer travel to a Canadian test facility.
These examples illustrate how NRC IRAP funding concentrates on R&D labour, critical subcontractors, consumables, and validation activities necessary to advance the technology toward commercialization.
Funding Disbursement & Claiming Process
IRAP reimburses eligible costs after they are incurred and paid:
Perform the approved R&D work within your project timeline and scope.
Capture time and expenses contemporaneously, following documentation standards.
Compile a monthly claim package that includes cost summaries, supporting documents, and brief technical progress notes.
Submit the claim as directed by your ITA. They may request clarifications or additional evidence.
Receive reimbursement once the claim is reviewed and approved, subject to agreement terms, caps, and any holdbacks.
Continue periodic technical and financial reporting, culminating in final claims and a project completion report.
Note: Advances are uncommon. Payment timing depends on completeness of claims and NRC IRAP processing timelines.
Stacking Rules
IRAP can often be combined with other Canadian government funding, but stacking is controlled:
Total public assistance cannot exceed 100% of eligible project costs and may be capped lower by NRC IRAP.
IRAP typically requires disclosure of all other funding (federal, provincial/territorial, municipal). Your IRAP contribution may be reduced to maintain allowable stacking levels.
Scientific Research and Experimental Development (SR&ED) tax incentives may still be claimed, but must be calculated on a net‑of‑assistance basis. Coordinate with your tax advisor to avoid double‑counting.
When stacking with provincial grants (e.g., Ontario, Québec/Quebec, British Columbia, Alberta), align cost categories and timelines so that each program funds distinct portions without overlap.
Real‑World Budgeting Tips
Prioritize labour: IRAP often centres on R&D salaries. Build a clear work breakdown structure (WBS) that maps tasks to named personnel and hours.
Right‑size subcontractors: Use external experts for discrete, high‑risk tasks. Obtain competitive quotes and clearly define deliverables.
Make materials traceable: Track consumables from purchase to experiment to result. Link usage to test logs.
Treat equipment carefully: Prefer rentals, usage fees, or approved depreciation. Confirm capital rules before committing.
Meter software and cloud: Tag project resources in your cloud console; export usage reports to support allocations.
Pre‑approve travel: Keep itineraries and receipts within policy. Restrict trips to technical needs.
Timebox youth roles: If using youth employment funding, define technical deliverables and reporting up front.
Lock in documentation habits: Daily time entries, weekly reviews, and monthly claim kits reduce rework and speed reimbursements.
Model stacking early: Build a funding stack plan that sequences IRAP, provincial grants, and SR&ED without double‑dip exposure.
Conclusion
NRC IRAP funding is designed to support Canadian SME innovation by sharing the eligible costs of R&D and closely related pre‑commercial activities. The strongest IRAP budgets emphasize direct technical labour, critical subcontractors, consumables, and essential testing, with clear documentation and disciplined claims. Because funding percentages, caps, and eligible categories are defined case‑by‑case in your contribution agreement, align early with your Industrial Technology Advisor and maintain rigorous records throughout the project. For additional guidance, consult our companion articles on who can apply to IRAP and how to apply to IRAP, and consider using helloDarwin’s hybrid consulting‑plus‑SaaS approach to simplify discovery, eligibility, and application tracking.
As of December 1, 2025: Always confirm current program terms with NRC IRAP before budgeting or incurring costs.
