Canada: Contingency fees in SR&ED | Research Credit Integrity Alliance

This page collects what the Canada Revenue Agency (CRA) and the federal government have published about contingency fees for preparing claims under the Scientific Research and Experimental Development (SR&ED) tax incentives. It describes the official record only. In this page, a contingency fee means a fee based on a percentage of the investment tax credit earned, which is how Form T661 describes the arrangement.1

Summary

Question	What the official sources say
Does the CRA recognize contingency fees as a billing arrangement?	Yes. Code 1 on Form T661 is a contingency fee arrangement, where the fee is based on a percentage of the investment tax credit earned.1
Must a contingency fee be disclosed?	Yes. The billing arrangement, rate and total fee for each claim preparer must be reported in Part 9 of Form T661.12
Is there a cap or ban?	None was identified in the Income Tax Act or in CRA guidance.23
Has the government studied the practice?	Budget 2012 announced a study of businesses hiring consultants on a contingency fee basis.4

The government's 2012 study

The federal budget of 2012 included a review of the SR&ED program. The CRA's summary of the budget's SR&ED measures states that a study would be conducted to better understand the practice of businesses hiring consultants on a contingency fee basis, and that input from stakeholders was being accepted by the Department of Finance until October 1, 2012.4 The Department of Finance consultation document itself could not be opened for this page.

The 2013 response: disclosure, not restriction

The measure that followed was announced in Budget 2013. According to the CRA, Form T661 would require each preparer's business number and billing details, including whether contingency fees were used and the amount of fees payable, and the taxpayer would certify where no preparer was involved.5 A penalty of $1,000 per SR&ED claim would apply where the information was missing, incomplete or inaccurate, with the taxpayer and the preparer jointly and severally, or solidarily, liable.5 The CRA states that the measure received Royal Assent on December 12, 2013 and applies to claims filed on or after January 1, 2014.5

The legislation is in the Income Tax Act. Subsection 37(11) requires the SR&ED form to contain claim preparer information, and subsection 162(5.3) defines that information to include the arrangement under which the claim preparer agrees to accept consideration.62 Neither provision limits the amount or type of fee.62 No other federal provision restricting contingency fees for SR&ED claims was identified.

How a contingency fee is reported

Part 9 of Form T661 lists five billing arrangement codes. Code 1 is a contingency fee arrangement, where the fee is based on a percentage of the investment tax credit earned. The others are an hourly rate, a daily rate, a flat fee and other arrangements.1 For a contingency fee, the claimant enters code 1 on line 950, the percentage on line 955 and the total fee paid, payable or expected to be paid on line 965.3

The CRA's guide to the form includes a worked example in which a preparer is paid a contingency fee at different percentages on successive amounts of the credit, with each percentage reported on a separate line under code 1.3 Because the fee may not be settled when the claim is filed, line 965 asks for the fee paid, payable or expected to be paid.1

What the CRA tells businesses

The CRA's published guidance to claimants does not tell businesses whether to use a contingency fee. It does address the use of third party preparers in general.

Responsibility. In a 2022 advisory, the CRA stated that all claimants are legally responsible for the accuracy of the information in their claims, and that a business using a third party is responsible for verifying the accuracy of the information submitted on its behalf.7
Unsolicited offers. The same advisory told businesses to be cautious of unsolicited offers to help claim SR&ED investment tax credits, to be wary of individuals who try to convince them to file a claim when the business is not actively conducting R&D work, and never to sign a blank form.7
Choosing a preparer. In 2023 the CRA advised businesses to select a preparer who is knowledgeable about SR&ED tax incentives and eligibility requirements, to ask the preparer to include them in conversations with the CRA, and to be wary of any preparer who asks them to omit the Part 9 information.8
Contract terms. A CRA news item warning dental professionals about third parties promoting SR&ED claims advised readers to make sure they understand the terms of the fees listed in the contract and any termination clauses, and stated that they are legally responsible even if they have been misled by third party promotions.9

None of these items mentions contingency fees by name.789

Where professional rules apply

Some claim preparers are members of professional bodies with their own rules. The CPA Code of Professional Conduct published by CPA Ontario prohibits a member in public accounting from performing a service for a contingent fee where the service is the preparation of an income tax return, and permits contingent fees for other services if the client agrees in writing to the basis for the fee before the engagement is substantially complete.10 The code does not mention SR&ED claims.10 These rules bind members of the body only. The statutory definition of a claim preparer does not depend on membership of any professional body.2 See professional body rules.

Recent administrative changes

Budget 2025 announced changes to how the CRA administers the SR&ED program, including an elective pre-claim approval process and the review of Form T661 through targeted consultations.11 The CRA's consultation report on proposed enhancements to the program, published in 2026, records that some businesses preferred to use a claim preparer, but does not mention contingency fees.12 See pre-claim approval.

Points the sources leave open

The outcome of the 2012 study. No published report of its findings was identified.
How common contingency fees are. No CRA statistics drawn from Part 9 billing codes were identified.

Sources

Canada Revenue Agency, Form T661, Scientific Research and Experimental Development (SR&ED) Expenditures Claim, T661 E (26), Part 9, Claim preparer information, lines 950 to 965 and billing arrangement codes. https://www.canada.ca/content/dam/cra-arc/formspubs/pbg/t661/t661-26e.pdf (accessed 11 October 2026). Back
Government of Canada, Income Tax Act, RSC 1985, c 1 (5th Supp), subsections 162(5.1), (5.2) and (5.3). https://laws-lois.justice.gc.ca/eng/acts/I-3.3/section-162.html (accessed 11 October 2026). Back
Canada Revenue Agency, T4088, Guide to Form T661 (T4088(E) Rev. 20), Part 9, Claim preparer information, lines 950 to 965 and example. https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/t4088/guide-form-t661-scientific-research-experimental-development-expenditures-claim-guide-form-t661.html (accessed 11 October 2026). Back
Canada Revenue Agency, Archived: Budget 2012, Scientific Research and Experimental Development Program, question 9. https://www.canada.ca/en/revenue-agency/programs/about-canada-revenue-agency-cra/federal-government-budgets/archived-budget-2012/archived-budget-2012-scientific-research-experimental-development-program.html (accessed 11 October 2026). Back
Canada Revenue Agency, Budget 2013, Scientific Research and Experimental Development (SR&ED) Tax Incentive Program, section on claim preparer information and penalty. https://www.canada.ca/en/revenue-agency/programs/about-canada-revenue-agency-cra/federal-government-budgets/budget-2013/budget-2013-scientific-research-experimental-development-tax-incentive-program.html (accessed 11 October 2026). Back
Government of Canada, Income Tax Act, RSC 1985, c 1 (5th Supp), subsection 37(11). https://laws-lois.justice.gc.ca/eng/acts/I-3.3/section-37.html (accessed 11 October 2026). Back
Canada Revenue Agency, Advisory for businesses claiming SR&ED investment tax credits (tax tip, October 12, 2022). https://www.canada.ca/en/revenue-agency/news/newsroom/tax-tips/tax-tips-2022/advisory-businesses-claiming-sred-investment-tax-credits.html (accessed 11 October 2026). Back
Canada Revenue Agency, Are you preparing to claim SR&ED tax incentives? Here's what you need to know (tax tip, May 30, 2023). https://www.canada.ca/en/revenue-agency/news/newsroom/tax-tips/tax-tips-2023/preparing-to-claim-sred-tax-incentives-what-you-need-to-know.html (accessed 11 October 2026). Back
Canada Revenue Agency, SR&ED news and updates, item "Dentistry professionals: look out for third parties promising access to SR&ED tax incentives". https://www.canada.ca/en/revenue-agency/services/scientific-research-experimental-development-tax-incentive-program/sred-updates.html (accessed 11 October 2026). Back
Chartered Professional Accountants of Ontario, CPA Code of Professional Conduct, Rule 215, Contingent fees (Rules 215.1 and 215.2). https://assets.cpaontario.ca/members/regulations-guidance/pdfs/CPA-Ontario-Code-of-professional-conduct.pdf (accessed 11 October 2026). Back
Department of Finance Canada, Budget 2025, Chapter 1, section "Enhancing the Scientific Research and Experimental Development Tax Incentives". https://budget.canada.ca/2025/report-rapport/chap1-en.html (accessed 11 October 2026). Back
Canada Revenue Agency, Consultation on proposed enhancements to the Scientific Research and Experimental Development (SR&ED) Program. https://www.canada.ca/en/revenue-agency/corporate/about-canada-revenue-agency-cra/transparency-proactive-disclosure-canada-revenue-agency/consultations-engagement-canada-revenue-agency/consultation-on-proposed-enhancements-to-sred-program.html (accessed 11 October 2026). Back