Fee caps and bans in other claims markets (brief) | Research Credit Integrity Alliance

Key points

Since March 2022 UK claims management firms may charge no more than 15 to 30 percent of redress on most financial services claims, with a cash maximum in each band.12
Canada capped the fee for help with a disability tax credit request at $100 in November 2021, after consultation participants described fees of 15 to 40 percent of the refund.345
In 2025 Congress used a fee "based on the amount of the refund or credit" as part of the test for an employee retention credit promoter, and attached a due diligence penalty.6
Federal law already caps or conditions contingent fees in Social Security, veterans and federal tort claims, where an agency or court fixes the amount first.789
The FCA's and Canada's published figures are forecasts or fee estimates; this brief found no official evaluation of how the measures affected claim quality.25

Why other markets are relevant

In each market described here, an adviser helps a claimant obtain money from a public scheme and some advisers are paid a share of what is recovered. The federal research credit shares that feature: Treasury's rules define a contingent fee to include a fee "based on a percentage of the refund reported on a return".10 The analogy has limits. The UK and Canadian schemes pay individuals, and in the federal benefits schemes an agency decides the amount before any fee is paid. The research credit is a self-assessed business credit.

The United Kingdom

The Financial Conduct Authority took over regulation of claims management companies in April 2019 and, under a duty given by Parliament in 2018, made rules on their fees for financial services claims.211 The cap is the lower of a percentage of redress and a cash maximum: 30 percent up to £420 for the smallest claims, falling to 15 percent up to £10,000 for redress of £50,000 or more.1 Fees outside the cap must be reasonable for the work done.1 Payment protection insurance claims were already capped at 20 percent by Parliament.2

The FCA said customers "could not effectively judge the value of services" and found fees "excessive" when measured against the value delivered, most of all on the largest awards.11 It considered disclosure and other charging models before deciding a cap was the most effective remedy.11 Some respondents argued that no win no fee customers "can never be out-of-pocket" and that claims firms provide access to justice.11 The FCA wanted firms to stay viable but concluded that those benefits did not justify higher fees.11

Canada

Canada's Disability Tax Credit Promoters Restrictions Act prohibits a promoter from charging more than the prescribed maximum, with a penalty of $1,000 plus the excess, less any amount repaid to the claimant.3 The regulations set the maximum at $100 for each request, or for each year, in force from 15 November 2021.4 The government said the aim was that refunds "remain at the disposal of those who are entitled to them", and estimated that promoters collected $9.5 million to $25.4 million on about 36,000 requests for 2018.5

For its SR&ED program, Canada does not cap fees but requires each claim to disclose the claim preparer and the billing arrangement, including any "contingency fee as a percentage of the investment tax credit earned".12

The United States

The IRS warned in 2023 that "a promoter can collect a contingency fee of up to 25% of the ERC refund", and accepted 80 percent repayment in its voluntary disclosure program because recipients "never received the full amount".1314 In July 2025 Congress defined a COVID-ERTC promoter partly by whether it charged a fee based on the amount of the refund or credit, and imposed a $1,000 penalty for each failure to meet due diligence requirements.6 It did not ban the fee.

Older federal statutes go further. Social Security fee agreements are limited to the lesser of 25 percent of past-due benefits or a dollar cap, now $9,200.715 No fee may be charged for help with a veterans' benefits claim before the initial decision, and contingent fees paid from past-due benefits are capped at 20 percent.8 Federal tort claims fees are capped at 20 or 25 percent, with criminal penalties for charging more.9

What the comparison shows

Governments have acted on how fees are calculated, not on the conduct of particular advisers, and nothing in this brief suggests that advisers who charge such fees act improperly. The tools range from disclosure through caps to prohibition. A percentage cap works best where an agency or court fixes the amount recovered. In a self-assessed credit, the adviser's calculation is the amount claimed, and a capped fee still rises with every judgment that enlarges the claim. Treasury gave that reason when it restricted contingent fees for returns and refund claims in 2007.16

Our position

Congress should prohibit contingent fees, commonly called success fees, in federal research and development tax credit engagements under Section 41, so that advisers are paid for the work they perform rather than for the size of the claim they produce. Swanson Reed, which publishes this brief, is a fixed-fee R&D tax adviser with a direct commercial interest: it does not charge success fees, and a ban would remove a pricing model it competes against. This position concerns the federal research credit only.

References

Financial Conduct Authority, FCA Handbook, CMCOB 5.2, rules CMCOB 5.2.9R, 5.2.10R and 5.2.17R. https://www.handbook.fca.org.uk/handbook/CMCOB/5/2.html (accessed 11 October 2026). Back
Financial Conduct Authority, FCA launches claims management companies fees cap, press release, 1 March 2022. https://www.fca.org.uk/news/press-releases/fca-launches-claims-management-companies-fees-cap (accessed 11 October 2026). Back
Disability Tax Credit Promoters Restrictions Act, S.C. 2014, c. 7, sections 2 to 7. https://laws-lois.justice.gc.ca/eng/acts/D-2.8/FullText.html (accessed 11 October 2026). Back
Disability Tax Credit Promoters Restrictions Regulations, SOR/2021-55, sections 1 to 3. https://laws-lois.justice.gc.ca/eng/regulations/SOR-2021-55/FullText.html (accessed 11 October 2026). Back
Government of Canada, Disability Tax Credit Promoters Restrictions Regulations: SOR/2021-55, Regulatory Impact Analysis Statement, Canada Gazette, Part II, Volume 155, Number 8 (14 April 2021), "Executive summary" and "Consultation". https://gazette.gc.ca/rp-pr/p2/2021/2021-04-14/html/sor-dors55-eng.html (accessed 11 October 2026). Back
Public Law 119-21, 139 Stat. 72 (4 July 2025), section 70605(a), (b) and (g). https://www.govinfo.gov/content/pkg/PLAW-119publ21/html/PLAW-119publ21.htm (accessed 11 October 2026). Back
Office of the Law Revision Counsel, 42 U.S.C. 406, subsection (a)(2)(A), United States Code 2024 edition. https://www.govinfo.gov/content/pkg/USCODE-2024-title42/html/USCODE-2024-title42-chap7-subchapII-sec406.htm (accessed 11 October 2026). Back
Office of the Law Revision Counsel, 38 U.S.C. 5904, subsections (c)(1) and (d)(1), United States Code 2024 edition. https://www.govinfo.gov/content/pkg/USCODE-2024-title38/html/USCODE-2024-title38-partIV-chap59-sec5904.htm (accessed 11 October 2026). Back
Office of the Law Revision Counsel, 28 U.S.C. 2678, Attorney fees; penalty, United States Code 2024 edition. https://www.govinfo.gov/content/pkg/USCODE-2024-title28/html/USCODE-2024-title28-partVI-chap171-sec2678.htm (accessed 11 October 2026). Back
Treasury Department, Circular No. 230, 31 CFR 10.27, Fees, paragraph (c)(1). https://www.ecfr.gov/current/title-31/subtitle-A/part-10/subpart-B/section-10.27 (accessed 11 October 2026). Back
Financial Conduct Authority, PS21/18: Restricting CMC charges for financial products and services claims (November 2021), paragraphs 1.3, 1.12, 2.4, 2.6, 2.8, 2.10, 2.16, 2.18 and 2.19. https://www.fca.org.uk/publication/policy/ps21-18.pdf (accessed 11 October 2026). Back
Canada Revenue Agency, T4088 Guide to Form T661 (Rev. 20, date modified 18 February 2026), Part 9, lines 935 to 975. 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
Internal Revenue Service, News release IR-2023-169, 14 September 2023. https://www.irs.gov/newsroom/to-protect-taxpayers-from-scams-irs-orders-immediate-stop-to-new-employee-retention-credit-processing-amid-surge-of-questionable-claims-concerns-from-tax-pros (accessed 11 October 2026). Back
Internal Revenue Service, News release IR-2023-247, 21 December 2023. https://www.irs.gov/newsroom/irs-new-voluntary-disclosure-program-lets-employers-who-received-questionable-employee-retention-credits-pay-them-back-at-discounted-rate-interested-taxpayers-must-apply-by-march-22 (accessed 11 October 2026). Back
Social Security Administration, Maximum Dollar Limit in the Fee Agreement Process, 89 FR 40523 (10 May 2024), and Partial Rescission, 90 FR 19241 (6 May 2025). https://www.federalregister.gov/documents/2025/05/06/2025-07813/maximum-dollar-limit-in-the-fee-agreement-process-partial-rescission (accessed 11 October 2026). Back
Treasury Department and Internal Revenue Service, T.D. 9359, 72 FR 54540 (26 September 2007), preamble, "Contingent Fees", pages 54541 to 54542. https://www.federalregister.gov/documents/2007/09/26/E7-18918/regulations-governing-practice-before-the-internal-revenue-service (accessed 11 October 2026). Back