Hands down the number one question we’ve been asked in the years we’ve been working in the SR&ED program is what kinds of software development is eligible for SR&ED tax credits?
This is a question that can’t be answered very specifically, e.g. all work on the Dynamics AX ERP system is definitely eligible and all work experimenting with the Linux O/S is ineligible. Rather, the easiest answer is it depends… So then what’s the point of this blog posting?
In any situation the development of software can be eligible for SR&ED tax credits, however, specific criterion should be met in order to ensure you’re performing SR&ED eligible work. The following points below should help you decide whether or not your software development is potentially SR&ED eligible.
1. What is the current state of the art? Does your work advance the state?
2. What are the current capabilities of existing software? Is the work you’re proposing or undertaking extending these capabilities?
3. How did you go about solving your problem? Did you read forums and use their solutions? Did you create a rigorous plan of experiments and desired results? Did you document the proposed solution?
4. Who did the work? In house staff? Contractors? Who owns the IP?
There are several more questions that probably need to be answered as well, but these should get you on the right track. Answering positively to most of these questions could mean you have some eligible work, answering negatively might mean routine engineering or routine development.
For a free consultation on whether or not your software project may or may not be eligible, please give us a call or send us an email.