Each industry faces its own challenges when filing an SR&ED Tax Credit Claim. There may be some activities that are easier to identify when claiming and others may be in a “grey area”. The examples below help illustrate a better understanding of the “grey area” to maximize your claim.
Is the company using open-source software (and therefore not eligible)?
The company can still be eligible if they extend or modify to overcome limitations/deficiencies. 80% of claims today involve some open-source documentation and are still eligible.
Is the company using existing software languages (and therefore not eligible)?
Most companies use existing software languages and are still eligible. It is not what language they use but rather what creative uses they find. 99% of claims involve some existing software languages and are still eligible.
Is the company using existing tools and or libraries (and therefore not eligible)?
If the company has modified and/or extended these tools and/or libraries, they are still eligible.
Do internal processes qualify?
Many large companies do internal processes for software development. These processes are still eligible but are often overlooked.
We did simple website development recently and are told we do not qualify for an SR&ED claim?
Simple website development tends to be harder to qualify as the costs/fees are low. However, developing re-usable tools/techniques for website development can be quite lucrative. These developments are eligible.
Some software-based SR&ED activities that may be eligible:
It is irrelevant if you are a start-up, small-medium enterprise, or large corporation to be eligible for the SR&ED Tax Credit. Below we have illustrated how a software company with only 5 technical staff in-house spending 50% of their time on R&D development to receive over $90,000 in a cash refund from the Canadian government.
|Ontario SR&ED Calculation|
|Are you a CCPC?||Yes|
|Number of technical staff directly engaged with R&D||5|
|Average salary of technical staff directly engaged with R&D||$55,000.00|
|Percentage of time spent in SR&ED||50%|
|Materials consumed during R&D activities||$0.00|
|Third-party payments such as to universities||$0.00|
|Federal Tax Credit||$66,224.00|
|Provincial Tax Credit||$23,913.00|
(Figures in the chart are a rough estimate. Please contact Braithwaite Canada for a detailed breakdown of your next SR&ED claim)
How can Braithwaite Canada assist with the software industry?
Braithwaite Canada takes a 7-step approach to maximize every R&D Tax Credit Claim filed to CRA (Detailed description of the 7-step approach).
For further information on how Braithwaite Canada can assist your company in successfully preparing an SR&ED Tax Credit claim to CRA, please contact us today.
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