Claiming R&D Tax Credits Through Software

What questions should my company ask when qualifying a claim?

Each industry faces its own challenges when filing an R&D claim. There are some items that are easier to identify when claiming and other items are in the “grey area”. Here are some questions companies should be asking when filing a Software claim.

 Is the company using opensource software (and therefore not eligible)?

The company can still be eligible if they extended it or modified it to overcome limitations/deficiencies. We find that 80% of claims nowadays involves some opensource but are still eligible.

Is the company using existing software languages (and therefore not eligible)?

Almost everybody uses existing software languages and they are still eligible. It is not what language they use but rather what creative uses they find with/for it. 99% of claims nowadays involve some existing software languages but they are still eligible.

Is the company using existing tools and or libraries (and therefore not eligible)?

If the company has modified or extended these tools and or libraries they could be eligible.

Do internal processes qualify?

Many large companies do internal software development for internal processes. This could be eligible but is usually overlooked.

I’ve done simple website development recently and was told I don’t qualify for an R&D claim?

Simple website development tends to be harder to qualify and usually, the costs/fees are low. However, developing re-usable tools/techniques for website development can be lucrative.

General Software-based R&D activities that may be eligible:

  • Development of new operating systems
  • Developing new generic methods of capturing, transmitting, storing, retrieving or manipulating, searching or securing data
  • Development of software to run new types of computer hardware, particularly where there are conflicts between hardware and software
  • Development of new programming languages or software development tools or the development of significant extensions to an existing language
  • Development of new software framework and/or architecture

Expenditures can include wages, third party contractor cost (contractor performing R&D in Canada), materials, machinery, equipment, and overheads.

For more information on claiming R&D Tax Credits Through Software, please contact Braithwaite Canada today.

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