As a software developer there are many opportunities to be innovative, even within the scope of routine business operations and activities. When a new product or industry breakthrough occurs, it is clear that innovation has occurred. However, when it comes to R&D tax credits in Canada, such as SR&ED, the definition of innovation is much broader – inclusive of incremental advancements, which can often be overlooked by management.
Through this article we hope to help eligible software development companies realize the opportunity, and to provide a checklist of the type of activities which are eligible for SR&ED, as well as some examples of projects that would qualify.
Maximizing your companies’ SR&ED tax credits is best supported by an expert in the field. SR&ED consultants help companies maximize their R&D tax credits and ensure that projects are submitted according to the CRA’s guidelines.
Checklist for Software Developers
Software development companies are normally involved in a number of business activities which are eligible for R&D tax incentives such as SR&ED. If your company has been involved in any of the following activities, a SR&ED claim is likely:
- Your team advanced technology in operating systems, programming languages, data management, communications software or software development tools
- Your team conducted research into methods of designing, developing, deploying, or maintaining software
- Your team produced advances in generic approaches for capturing, transmitting, storing, retrieving, manipulating, or displaying information
- Your team attempted to fill a technology gap in order to develop or advance a system
- Your team attempted to improve the performance, speed or functionality of an application
- Your team encountered unexpected technical uncertainties during development efforts (i.e. hardware/ software issues) that required multiple attempts to solve the functionality issues
- Your team conducted research and development into software tools or technologies in specialized areas of computing (i.e. image processing, geographic data representation, character recognition, artificial intelligence)
Software Industry SR&ED examples
Software developers often have SR&ED eligible projects on the go on a daily basis when trying to create programs or apps or overcome technical barriers. Software development issues that are common include timing issues (i.e. deadlocks, races), resource management (i.e. memory footprint), exception handling, thread synchronization and responsiveness (i.e. start-up time; responsiveness).
To give you an idea, one concrete example of software development that met the requirements of SR&ED is the following: a cached turn-by-turn GPS navigation was created to solve drivers’ difficulty of navigating roads outside of cell phone service range.
Businesses that produce software for another company’s specific use are also eligible. Perhaps your firm was approached to create software that allows your client to share inventories through their smart phones? This would be an eligible R&D activity!
How ECR can help
Our experienced SR&ED experts at Enhanced Capital Recover will be able to identify all of your eligible projects and assist you in recovering SR&ED tax credits to which you are entitled.
Even if you currently complete your own R&D tax credits application, our experts will be able to validate and optimize your scientific descriptions as well as your eligible expenses. We will assist you in maximizing your return on investment while minimizing the risk of audit by Revenue Canada.
With our contingency based fees, we completely eliminate the risk of making a claim. We do the work up front and only get paid when your refund is secured. Contact us today for a free, no obligation consultation.