Reviewed by Logan Hanson, BSc, CPA. Last verified against CRA guidance on August 4, 2026.
Most software founders I talk to assume their whole build is either in or out. It usually isn’t. SR&ED doesn’t reward the product you shipped. It rewards the parts where you were stuck, where the answer wasn’t sitting in the docs or on Stack Overflow, and you had to experiment your way through. Knowing which slices of your year count is the difference between a thin claim and a full one.
Software work counts for SR&ED when you hit a technological uncertainty that standard practice could not resolve, worked through it in a systematic way, and were aiming at a technological advancement. The CRA uses those three tests together, and every eligible project has to show all three.
Here’s what that looks like in plain terms. You set out to do something, and a competent developer in your field could not have told you up front whether it would work or how to get there. So you tried an approach, measured it, it fell short, you changed one thing, and you went again. That loop, applied to a real technical problem, is the heart of an SR&ED software claim.
Common examples of the eligible slice in a software year:
Notice what these have in common. In each one, the outcome was genuinely in doubt at the start. That doubt is the thing the CRA is paying you to have tackled.
Software work does not qualify when the outcome was never in real technical doubt, even if it took months and a strong team to finish. Hard is not the same as uncertain. This is where most claims quietly lose value, because founders describe the work they’re proud of instead of the work that was actually unknown.
Work that usually does not count on its own:
One caveat worth saying out loud: some of that work becomes claimable when it directly supports the experimental core. Building test harnesses to run your experiments, or writing data-handling code that only exists to let you trial the uncertain part, can qualify as support work. On its own it doesn’t. Tied to a real uncertainty, it can. The gap isn’t between companies that innovate and those that don’t. It’s between companies that recognize their innovation and those that don’t.
You had technological uncertainty if, at the start, a skilled person in your field could not have known whether your goal was achievable or how to achieve it using existing knowledge. That’s the test, and it’s more specific than it sounds.
A quick way to check yourself: could you have looked up the answer, hired someone who already knew it, or bought a product that did it? If yes, there probably wasn’t uncertainty in the SR&ED sense. If the honest answer is that nobody could tell you, and you had to find out by building and testing, you’re on the right side of the line.
Not knowing whether customers would buy it is business risk, and it doesn’t count. Not knowing whether you could make the thing perform, scale or work at all with the technology available is technological uncertainty, and it does. Founders mix these up constantly, and it’s usually why a claim gets written around the product story instead of the technical one.
Eligible software costs are salaries and wages for the technical work, Canadian arm’s-length contractors at 80% of the eligible amount, materials consumed or transformed, and overhead. For most software companies, salaries are the biggest line by far.
The prescribed-proxy amount is worth knowing about. Rather than tracking every scrap of overhead, you take a set percentage on top of your eligible salaries, which for most software teams is simpler and often comparable. A good SR&ED partner runs it both ways and takes whichever is higher.
Here’s the math on a real software year. Take a Canadian-controlled private corporation (a CCPC) that built a real-time data pipeline, with roughly this much tied to genuine experimental work:
That’s a qualifying base of about $520,000. At the enhanced federal refundable rate of 35%, that’s roughly $182,000 in federal credit, before the prescribed-proxy overhead amount and provincial credits, which usually push the total higher. The combined federal and provincial return is higher than the federal credit alone, though not by simple addition, and how much higher depends on your province.
Two things make this matter for software startups specifically. For a CCPC, the enhanced 35% credit is refundable, so it’s paid to you in cash even if you owe no tax. And the enhanced rate now applies to the first $6 million of qualifying expenditures, up to $2.1 million refundable a year, though that ceiling phases out as taxable capital grows and is shared among associated corporations. You can read more in our State of SR&ED overview.
Software work is claimable when all three tests hold: technological uncertainty, systematic investigation, and technological advancement. Run your year against this list before you decide there’s nothing to claim.
If you’re keeping almost none of this today, don’t panic, and don’t skip the claim. You can reconstruct a lot from your own tooling. Just fix it going forward by tracking the technical work as you go. That’s the single cheapest thing you can do to grow next year’s claim.
Most SR&ED firms charge a percentage of your refund. We don’t. We charge a flat fee, billed monthly, which usually works out to roughly half the lifetime cost of a percentage-based firm. As far as we know, we’re the only SR&ED provider that publishes its pricing on its website, so you can see it before you ever talk to us.
A few things that matter for software teams in particular:
The software work that counts for SR&ED is the work where you didn’t know the answer and had to find it. Not the polished feature list, not the months of hard building, but the specific technical problems that had no obvious solution. Find those, tie your costs to them, keep a light record, and file inside the window. If you want a second set of eyes on where your eligible work actually sits, grab a free consultation and we’ll walk your year with you. You aren’t alone in the valley. For the wider picture of the program, the CRA’s SR&ED program page lays out the official rules.
Related reading: why tech firms struggle with SR&ED claims, how SR&ED tax services support startup R&D credits, and what could go wrong if founders file on their own.
No. It doesn’t have to be new to the whole world. The advancement has to go beyond the standard practice a competent professional in your field could readily deduce. If your team hit a genuine technical problem that public knowledge and standard practice could not solve, and you had to experiment to get past it, that can qualify even if a similar solution exists somewhere you could not access.
Yes. The CRA looks at whether you faced technological uncertainty and investigated it systematically, not at whether you shipped. Failed and abandoned work qualifies on the same terms as successful work. What matters is that you tried to resolve a real uncertainty and kept a record of the attempt.
No. Almost everyone builds on existing tools. The question is whether combining or extending them forced you past a technical unknown that had no obvious answer. Standard configuration does not qualify. Pushing a platform past its documented limits, or making incompatible systems work together in a way nobody had a recipe for, can.
Often yes. Arm’s-length Canadian contractors are claimable at 80% of the eligible amount when the work is done in Canada on your behalf by a taxable supplier. The same eligibility test applies to their work as to your employees’: it has to address technological uncertainty, not just build features.
For corporations, the deadline is 18 months after your fiscal year-end. A December 31, 2024 year-end has to be filed by June 30, 2026. The CRA very rarely accepts late claims, so unclaimed work from an old year usually stays unclaimed once that window closes.
It helps a lot, but you are not automatically disqualified without it. You can reconstruct time from commits, tickets, stand-up notes and release history, though a contemporaneous record is stronger and easier to defend. The fix for next year is simple: track the technical work as you go, not at filing time.
This article is general information, not tax advice. Tax figures depend on your corporation type, province, and taxation year.
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