We have a client that has large software costs that get capitalized into class 12, to which the half year rule applies generally (ex. vs. small tools where the half year restriction is lifted for the class).
Noticed TaxCycle wasn’t calculating the accelerated rate (i.e. 100%) on additions even when we indicated them as eligible for AIIP, called support and it sounds like they got that direction from CRA.
I don’t see where this restriction on class 12 would come from. We talked with a senior agent at CRA and they pointed to a “computer software tax shelter” exception, which I haven’t found a clear definition of, but I believe tends to apply to situations where the amount being capitalized isn’t paid for in cash (ex. 70% debt financed with a note due in 20 years).
Have found nothing else to support CRA’s position re: the class 12 restriction for legitimate software costs that are paid for in cash, but have found multiple articles that seem to indicate the 100% rate should apply:
Wondering if anyone provide further clarity, or support for CRA’s position?