Software Eligibility for SR&ED

Of the estimated 20,000 claims for SR&ED submitted in 2017 (Source: Amy Siu – Pacific Region Assistant Director – SR&ED for CRA), fully 50% were for software, and at least 95% represented claims for “Experimental Development”. Presumably most of the eligible work was done by engineers using standard engineering techniques.

Companies considering claiming SR&ED are faced with a great deal of ambiguity and uncertainty. As practitioners we understand this. In the past the CRA has issued sector specific guidance for various industries. Practitioners, claimants and the CRA each relied on these guidance documents in the past. However in the last few years all of these were withdrawn.

In 2017 however, the CRA changed direction and issued a new guidance document for software claimants.

While it is good to know that the CRA continues to be committed to the program, the implementation is still difficult because of the subjectivity of the definition. Claimants must be able to answer “YES” to each of the 5 Questions.

Claimants must be able to answer “YES” to each of the 5 Questions

The method to establish if there is SR&ED involves answering five

questions.

1. Was there a scientific or a technological uncertainty?

2. Did the effort involve formulating hypotheses specifically

aimed at reducing or eliminating that uncertainty?

3. Was the overall approach adopted consistent with a

systematic investigation or search, including formulating

and testing the hypotheses by experiment or analysis?

4. Was the overall approach for the purpose of achieving a

scientific or a technological advancement?

5. Was a record of the hypotheses tested and the results

kept as the work progressed?

Remember: “It is determined that there is SR&ED if the answer to all

five questions is ‘YES’.”

“If you are using standard engineering tools and methodologies, you can’t be doing eligible R&D.”