Application Development and System Integration:

SR&ED in the Software Industry

Written by:
Nicolas DesRoches, Technical Writing Team Lead.

Keeping up with today’s ever-changing technologies can be a daunting task, but also a lucrative opportunity for software companies looking to cater to new markets or take advantage of
new technological possibilities. Much of this work is concerned with developing new applications and integrating systems. Testing and developing networks and systems, experimenting with crossfunctionality and adaptability, and ensuring seamless integration and multi-layer communication are all key functions of software development, and some or all of these processes may be eligible for SR&ED tax credits.

The use of multiple platforms, a variety of operating systems, nonrelational databases, complex algorithms, multithreading, and intermediary layers can all present difficulties, and overcoming these
issues can be no small task. Data validity issues can be present at any and every level, and hardware limitations like processor speed, available memory, and limited hard drive space create challenges that require experimentation to overcome. Work performed to overcome these technological limitations, beyond routine tasks such as hardware upgrades or adoption of plug-and-play solutions, may be eligible under the SR&ED program.

Often, eligible SR&ED projects in software development are subsets of larger business projects. Software work can often be chalked up as due processing, standard practices, or bug resolution, none of which are directly SR&ED eligible. However, the aforementioned work can potentially be eligible as supporting work for a qualifying SR&ED project after an actual technological uncertainty is defined.

For example, a company recently developed a new software system which allowed manufacturers to manage and schedule their operations. Part of the development involved the utilization of a distributed cloud storage system. This presented a number of technological uncertainties, especially because it was difficult to verify the integrity of data in outsourced storage. Through multiple
iterations and experiments, the company developed an efficient and scalable scheduling strategy using client-server integrity verification and quick access indexing. By carrying out a series of tests to overcome obstacles which available knowledge and practices could not solve, and advancing their organizational knowledge, the company met SR&ED program requirements. They were consequently able to claim some of their due processing and issue resolution activities as part of their SR&ED claim, proving the iterative steps they took to resolve the technological uncertainty. With a successful claim, they were able to offset labour costs through SR&ED tax credits.


Nicolas is the Technical Writing Team Lead and acting Editor-in-Chief at NorthBridge. His writing experience with a wide range of
audiences ensures he clearly expresses your project goals.

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