SR&ED for Software Companies
Does Your Software Development Qualify for SR&ED?
Most Canadian software companies leave $50K–$500K per year in tax credits unclaimed. If your engineers solve problems where the answer isn't known in advance, you likely qualify.
Eligible vs. Ineligible Activities
The key distinction is technological uncertainty — did your team have to experiment, investigate, or try multiple approaches because the solution wasn't known?
Likely Eligible
Building a custom ML model to solve a prediction problem with no known solution
Technological uncertainty in algorithm design
Designing a novel data pipeline architecture to handle real-time processing at scale
Systematic investigation of performance constraints
Developing a new search/ranking algorithm that goes beyond existing approaches
Technological advancement beyond standard practice
Creating a custom compiler, interpreter, or domain-specific language
Fundamental computer science advancement
Engineering a multi-tenant architecture with novel isolation guarantees
Uncertainty in system design and security boundaries
Building a real-time collaboration engine (like multiplayer editing)
Conflict resolution and synchronization challenges
Likely Not Eligible
Routine bug fixes and maintenance patches
No technological uncertainty
UI/UX restyling or redesign using existing frameworks
Standard practice, not advancement
Integrating a well-documented third-party API (Stripe, Twilio)
Following established documentation
Setting up standard CI/CD pipelines with off-the-shelf tools
Routine application of known techniques
Migrating from one cloud provider to another using documented processes
No systematic investigation required
Adding CRUD operations or standard database queries
Well-established programming practice
SR&ED-Eligible Technology Areas
Here are common areas of software development that frequently qualify for SR&ED credits, with real-world examples of eligible work.
AI & Machine Learning
Custom model architectures, novel training approaches, NLP systems, computer vision pipelines, and reinforcement learning implementations.
- Developing a custom transformer model for domain-specific text
- Building a novel recommendation engine beyond collaborative filtering
- Creating an automated labeling system using active learning
Cloud & Infrastructure
Novel distributed systems, custom orchestration, auto-scaling architectures, and edge computing solutions.
- Designing a serverless architecture for sub-10ms response times
- Building a custom container orchestration system
- Creating a novel caching strategy for globally distributed data
API & System Integration
Complex system interoperability, real-time data synchronization, and novel protocol implementations.
- Building a real-time bidirectional sync engine between heterogeneous systems
- Developing a custom API gateway with novel rate-limiting algorithms
- Creating a protocol adapter for legacy system modernization
DevOps & CI/CD Innovation
Custom deployment strategies, novel testing frameworks, and automated quality assurance systems.
- Developing an AI-based test generation system
- Building a custom blue-green deployment system with zero-downtime guarantees
- Creating a novel static analysis tool for domain-specific patterns
Data Engineering & ETL
Novel data processing architectures, custom query engines, and real-time analytics systems.
- Building a streaming ETL pipeline handling 1M+ events/second
- Developing a custom query optimizer for a domain-specific data model
- Creating a novel data deduplication algorithm for fuzzy matching
Security & Cryptography
Novel encryption schemes, custom authentication systems, and advanced threat detection.
- Developing a zero-knowledge proof system for identity verification
- Building a custom anomaly detection engine for security events
- Creating a novel tokenization scheme for PII data
The CRA's 3-Question Eligibility Test
The CRA uses three questions to determine if your work qualifies. Here's what they mean in plain developer language.
Was there technological uncertainty?
Could your team determine the outcome in advance using standard knowledge? If you had to experiment with different approaches — try architecture A, benchmark it, then try architecture B — uncertainty existed.
Example: "We didn't know if a graph-based data model could meet our query performance requirements at scale."
Was there systematic investigation?
Did your team follow a methodical approach? This doesn't mean lab notes — it means hypothesizing, testing, measuring results, and iterating. Sprint-based development with defined experiments counts.
Example: "We benchmarked three caching strategies, profiled each under load, and documented the trade-offs before selecting our approach."
Was there technological advancement?
Did your team gain new knowledge or create something that goes beyond what was publicly available? This doesn't require a patent — it means you learned something new about what works (or doesn't) in your domain.
Example: "We discovered that combining technique X with technique Y achieved 3x better throughput than either alone — something not documented anywhere."
Common Misconceptions
These myths prevent thousands of Canadian software companies from claiming credits they're entitled to.
"We're not doing R&D — we're just building product."
Reality: If your engineers are solving problems where the solution isn't known in advance, that's R&D. Building a product often involves significant technological uncertainty — especially in AI, data systems, and scalability challenges.
"Only lab research or PhD-level work qualifies."
Reality: SR&ED doesn't require academic research. It requires systematic investigation to resolve technological uncertainty. A senior developer experimenting with different architectures to solve a performance problem is doing SR&ED-eligible work.
"Our project failed, so it doesn't qualify."
Reality: Failed experiments are actually strong SR&ED candidates. The CRA explicitly states that the outcome of the work doesn't matter — what matters is that technological uncertainty existed and was systematically investigated.
"We use open-source tools, so it's not novel."
Reality: Using open-source libraries as building blocks is fine. If you're combining, extending, or pushing those tools beyond their documented capabilities to solve a new problem, that work qualifies.
"SR&ED is only for big companies with dedicated R&D teams."
Reality: Startups with even 2-3 developers frequently qualify. In fact, CCPCs (Canadian-Controlled Private Corporations) get the highest credit rate at 35% — the program is designed to help small companies.
How Glauq Integrates With Your Workflow
Our AI connects to the tools you already use and automatically identifies SR&ED-eligible work — no extra documentation burden on your team.
Connect Your Repos
Link your GitHub, GitLab, or Bitbucket repositories. Our AI analyzes commit history, pull requests, and code changes to identify eligible R&D activities.
Auto-Identify Eligible Work
AI scans your Jira, Linear, or Asana tickets alongside code changes to flag work involving technological uncertainty — finding 40% more eligible activities than manual review.
Generate & File Your Claim
We auto-generate CRA-compliant technical narratives, calculate your eligible expenditures, and prepare your T661 form — reviewed by SR&ED experts before filing.
Stop Leaving Money on the Table
Join 500+ Canadian software companies that use Glauq to automatically identify, document, and claim their SR&ED tax credits.
Related Resources
Understanding SR&ED: A Complete Guide
Everything you need to know about the SR&ED program and how it benefits startups.
Read more5 Strategies to Maximize Your Claims
Proven strategies to identify more eligible activities and boost your refund.
Read moreHow AI is Revolutionizing Tax Credits
Learn how AI automation transforms the SR&ED claim process.
Read moreFrequently Asked Questions
Does software development qualify for SR&ED?
Yes — software development qualifies for SR&ED when it involves technological uncertainty that cannot be resolved through standard practice. This includes developing new algorithms, creating novel architectures, building AI/ML systems, and solving complex engineering challenges where the solution isn't known in advance.
What is 'technological uncertainty' in software?
Technological uncertainty exists when you can't determine in advance whether a particular approach will work, or how to achieve a desired result. For example: 'Can we process 1M events/second with sub-100ms latency?' or 'Can we train a model to accurately classify X with limited labeled data?' If your team had to experiment, prototype, or try multiple approaches, uncertainty likely existed.
Can SaaS startups claim SR&ED?
Absolutely. SaaS companies are among the most common SR&ED claimants. Building a SaaS product often involves significant R&D in areas like multi-tenancy, scalability, real-time processing, security, and AI features. As a CCPC, you can receive a 35% refundable credit on your first $3M of eligible expenditures.
How much can a software company claim?
A typical Canadian software company with 5-10 developers can claim between $100K and $500K per year in SR&ED credits. The amount depends on the proportion of time spent on eligible activities and your salary costs. Use our SR&ED calculator for a quick estimate.
Do we need to document our work differently?
Good development practices often overlap with SR&ED documentation requirements. Git commits, pull request descriptions, Jira tickets, architecture decision records, and sprint retrospectives can all serve as supporting evidence. Glauq's AI integrates with these tools to automatically identify and document eligible activities.
What if only part of a project qualifies?
That's completely normal. Most software projects contain a mix of eligible and ineligible work. For example, the novel algorithm powering your feature qualifies, but the standard CRUD interface around it doesn't. SR&ED claims can be made on the eligible portions — you don't need an entire project to qualify.