One of the most important steps in launching your business is building your product—or at least a minimum viable product (MVP). Without an MVP, it’s tough to raise capital or even think about scaling up. The product always comes first.
Since you can’t just pull that MVP out of thin air, you’ll need to spend hours refining, troubleshooting, and probably get some extra help along the way.
To be eligible for SR&ED tax credits, you need to demonstrate that you tried to advance technology, encountered real challenges, and either achieved your goal or didn’t (don’t worry, unsuccessful attempts still qualify).
The key thing you must do during this testing phase is document every challenge you face along the way.
Documentation is absolutely essential to support your claim, no matter how big or small. Track your progress, highlight the obstacles, and show that you and your team followed a structured process to overcome them.
If you don’t document those challenges, how will you prove the work your team did, as required for a successful SR&ED claim?
SR&ED Documentation Requirements
If your SR&ED claim is selected for audit, you’ll be asked to provide proof to support your claim. The CRA requires two types of supporting evidence: documentation for the SR&ED work performed, and documentation for the SR&ED expenses you’re claiming.
1. Evidence of SR&ED Work Performed
This includes any documentation that shows the full scope of your R&D work—what was done, how it was done, and when. We recommend that all documentation be dated, signed, and clearly linked to the work performed, following CRA guidelines.
Note: If you use supporting evidence created after the project was completed, the CRA requires that this evidence accurately reflects the project as described in Part 2 of Form T661.
2. Evidence of SR&ED Expenses Claimed
In short, we recommend that all your supporting documents should:
- Be contemporaneous—that is, created at the same time as the SR&ED work is performed.
- Be dated to prove the work happened in the fiscal year you’re claiming.
- Highlight the technological uncertainties and the time spent addressing them to find solutions.
These requirements may sound simple, but in practice, it can be tough for some teams to keep up with diligent record-keeping—especially for software development teams using an agile methodology.
The good news: if your team already uses project management tools like Jira, Trello, Asana, or code repositories like Github, Bitbucket, or Gitlab, you’re already halfway to having the documentation you need.
With a few simple adjustments, you can easily use your technical team’s current workflow to capture all the information needed for your SR&ED claim.
Types of Documentation
Here are common types of documentation (that you’re likely already using) that can support your software SR&ED claims:
- Timesheets – all employees involved in R&D should track 100% of their time, clearly separating SR&ED-eligible and non-eligible activities. This allows you to accurately calculate the percentage of time spent on SR&ED. Add notes to timesheets about activities and technical challenges encountered.
- Technical challenges – keep records of the technical obstacles your team faced during development. Include details on experiments, prototypes, iterations, testing, and analysis of results. Add specific metrics where possible (for example: performance exceeded 5 seconds when the target was 1 second; memory usage was X with 10 concurrent users). This can be done weekly or bi-weekly.
- Version control for all technical documents – use version control for architecture docs, design docs, and source code to track system evolution. Add notes on technical issues when checking files into the version control system.
- Software prototypes – save prototypes (possibly in your version control system) and include notes on your analysis of each prototype.
- Test documents – save test cases, results, and analysis. Include dates and the names of those who performed the testing.
- Developer Notebooks – keep all handwritten developer notebooks and make sure notes are dated.
- Meeting minutes – include the date, attendees, meeting duration, and bullet-point summaries of technical topics discussed.
- Whiteboard photos – take photos of software designs drawn on whiteboards and save them with your project documentation.
- Emails – track email exchanges and label those where relevant technical challenges were discussed.
In other industries, you can also include product prototypes, related materials, and engineer notebooks.
What should I include in my Jira descriptions to help with my SR&ED claim?
The CRA wants to see details about the technical challenges faced during R&D. Be sure to include information on experiments, prototypes, iterations, testing, and analysis of results.
Your team should also include specific metrics where relevant (for example: performance exceeded 5 seconds when the target was 1 second; memory usage was X with 10 concurrent users; algorithm accuracy was x when tested with y variables).
If your team is small and the step-by-step process above seems like too much overhead for SR&ED, don’t worry—there’s no one-size-fits-all approach. We’ve compiled industry averages from our users to help you find the right solution for your business.
I. R&D Team Size: 1-3 developers
Use Microsoft Excel, Google Sheets, and GitHub. Yes, Excel and Google Sheets are perfectly acceptable for small teams—the CRA doesn’t expect you to invest in expensive project management tools. Small teams can move quickly and collaborate easily in a shared spreadsheet.
II. R&D Team Size: 4-7 developers
For a team of 4-7 developers, we recommend using the basic version of Jira and GitHub. Once your team grows beyond 3 developers, it’s usually time to switch to a project management tool instead of relying on Excel or Google Sheets.
There are plenty of tools out there, but we’ve found that about 50% of our clients use the Jira + GitHub stack. Your team can also consider Trello, Gitlab, Notion, or Asana.
III. R&D Team Size: 8+ developers
Once your team reaches 8 or more developers, it’s time to use Jira (with story points) and GitHub to manage and plan your sprint cycles effectively. Atlassian recommends using story points to plan, manage, and bring transparency to your product development work.
Step-by-Step Approach to Tracking Your Technical Documentation
Step 1: Use the built-in hierarchy of your project management tools
This data structure lets you see who’s working on what and how your organization is delivering new, innovative products.
By following the data structure recommended by Atlassian, you’re not only preparing for your SR&ED claim—you’re also boosting development speed, transparency, and communication as your company grows.
Step 2: Assign Jira story points to your sprints
If you use agile development, assigning Jira story points to your sprints will help you plan and deliver on your goals—and also serves as a time-tracking tool for your SR&ED claim.
We recommend a simple 15-point-per-sprint agile methodology. This gives your team accurate time estimates that will back up your SR&ED claim to the CRA if you’re ever audited.
Step 3: Use your code repository for version control.
This may seem obvious, but it’s also solid evidence for your SR&ED claim. By referencing your Jira ticket number in your Git commit, you’re creating an audit trail that stands up to even the strictest CRA review.
Step 4: Allocate story points
Your team should assign story points to quality assurance, project management, and resource management to maximize your SR&ED claim and minimize overhead. While these roles aren’t always tracked in Jira, creating a task for each sprint actually provides technical evidence for your SR&ED claim.
Step 5: Data integration
Connect your data to an SR&ED software platform (like Boast.ai’s AI-powered solution) to automate manual tasks such as time tracking and automatic categorization of service tickets and epics to the right projects.
Step 6: File your SR&ED claim and get your money!
When it’s time to file your SR&ED claim, you can start preparing the full technical write-up required by the CRA. If you work with Boast.ai, our in-house team of SR&ED tax experts will prepare your entire claim for you.
Once everything is ready, your team just needs to approve the reports and wait for the CRA to process your SR&ED refund.
SR&ED Documentation Tips
We don’t believe in telling companies exactly how to document their work—every organization and team is different. However, here are some proven tips we’ve seen work well during the claim process:
- Don’t underestimate the value of challenges and notes captured in emails.
- Start documenting early, even if you’re not sure yet whether your work is SR&ED-eligible.
- Set reminders to add notes in your project management system.
- Set reminders to record your time at the end of each day.
- For software companies, add notes directly in the source code.
- Appoint an internal champion to oversee the process.
So do you really have to document your SR&ED eligible work? Yes, you do. And the more you do, the better your SR&ED claim will be.
