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Policy Brief No. 16

International lessons for US policy (brief)

This paper sets out research and the publisher's opinion. Factual statements are cited to their sources. It makes no allegation about any firm or person not named in a cited official record.

A summary of what measures in four other countries suggest for federal policy on how research credit claims are prepared and paid for. Other countries are described factually; the only recommendation is for the United States.

ResearchCreditIntegrity.org is operated by SR Tax Services LLC under the Swanson Reed brand. Swanson Reed is an R&D tax advisory firm with a commercial interest in how R&D tax advisers are paid. See our conflicts of interest statement.

Key points

  1. Canada has required each paid SR&ED claim preparer's billing arrangement, including any contingency fee, and the total fee to be reported on the claim since 2014.1Source 1Government 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).2Source 2Canada Revenue Agency, T4088, Guide to Form T661 (T4088(E) Rev. 20), Part 9, Claim preparer information, 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).
  2. The United Kingdom pays R&D tax credits only to the claimant company, which HMRC said reduces "the financial incentive for agents to overstate claims".3Source 3HM Revenue and Customs, Corporate Intangibles Research and Development Manual, CIRD81805, "R&D tax relief: conditions to be satisfied: restriction of nominations and assignments". https://www.gov.uk/hmrc-internal-manuals/corporate-intangibles-research-and-development-manual/cird81805 (accessed 11 October 2026).4Source 4HM Revenue and Customs, Approach to Research and Development tax reliefs 2023 to 2024 (published 30 October 2024), sections 1.2 and 2.1 and Annex B, Theme 5. https://www.gov.uk/government/publications/hmrcs-approach-to-research-and-development-tax-reliefs-2023-to-2024/approach-to-research-and-development-tax-reliefs-2023-to-2024 (accessed 11 October 2026).
  3. No statute in the four countries reviewed has been found to prohibit contingent fees for R&D claims, so a federal prohibition would go further than any of them.5Source 5Sources reviewed for this point, none of which contains a prohibition or cap: Government of Canada, Income Tax Act, sections 37 and 162 (https://laws-lois.justice.gc.ca/eng/acts/I-3.3/section-162.html); HMRC, CIRD81805 (https://www.gov.uk/hmrc-internal-manuals/corporate-intangibles-research-and-development-manual/cird81805); Revenue Commissioners, Notes for Guidance, Part 29, section 766C (https://www.revenue.ie/en/tax-professionals/documents/notes-for-guidance/tca/part29.pdf); Income Tax Act 1947 (Singapore), section 37S (https://sso.agc.gov.sg/Act/ITA1947?ProvIds=pr37S-) (all accessed 11 October 2026).

Why look abroad

The United Kingdom, Ireland, Canada and Singapore each run a research and development tax incentive, and several have acted on how claims are prepared and paid for. Their systems differ from the federal credit, and their tax authorities have powers the IRS lacks: in 2014 the D.C. Circuit held that Treasury's authority does not extend to regulating tax return preparers without new legislation.6Source 6US Court of Appeals for the District of Columbia Circuit, Loving v. Internal Revenue Service, No. 13-5061, decided 11 February 2014, slip opinion pages 2 to 3 and 17 to 18. https://media.cadc.uscourts.gov/opinions/docs/2014/02/13-5061-1479431.pdf (accessed 11 October 2026). This brief describes the foreign measures factually and makes recommendations only for the United States.

What the four countries have done

Disclose the fee (Canada). Form T661 asks whether a claim preparer was engaged and, for each, the business number, billing arrangement, billing rate and total fee. A false statement or omission carries a $1,000 penalty for which the claimant and preparer are jointly liable.1Source 1Government 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).2Source 2Canada Revenue Agency, T4088, Guide to Form T661 (T4088(E) Rev. 20), Part 9, Claim preparer information, 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). The rule followed a 2012 study of "the practice of businesses hiring consultants on a contingency-fee basis".7Source 7Canada 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).

Control the money (United Kingdom and Ireland). For claims made on or after 1 April 2024, HMRC generally pays R&D tax credits only to the claimant company.3Source 3HM Revenue and Customs, Corporate Intangibles Research and Development Manual, CIRD81805, "R&D tax relief: conditions to be satisfied: restriction of nominations and assignments". https://www.gov.uk/hmrc-internal-manuals/corporate-intangibles-research-and-development-manual/cird81805 (accessed 11 October 2026). Ireland bars agents from receiving clients' business tax refunds directly.8Source 8Revenue Commissioners, Tax and Duty Manual Part 37-00-04b, Guidelines for Agents or Advisors acting on behalf of taxpayers, section 14. https://www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-37/37-00-04b.pdf (accessed 11 October 2026).

Name every adviser (United Kingdom). UK claims must give contact details of all agents involved, including those who analyzed costs or prepared technical assessments.9Source 9HM Revenue and Customs, Additional information you must submit before you claim Research and Development tax relief, section "Contact details". https://www.gov.uk/guidance/submit-detailed-information-before-you-claim-research-and-development-rd-tax-relief (accessed 11 October 2026).

Regulate advisers by statute (United Kingdom). Paid UK tax advisers who deal with HMRC must register, and since 1 April 2026 HMRC can penalize advisers for conduct intended to cause a loss of tax revenue.10Source 10HM Revenue and Customs, Check if and when you need to register as a tax adviser with HMRC (last updated 3 September 2026), section "Who needs to register". https://www.gov.uk/guidance/check-if-and-when-you-need-to-register-as-a-tax-adviser-with-hmrc (accessed 11 October 2026).11Source 11HM Revenue and Customs, Compliance Handbook, CH176100 and CH176140, "Sanctionable conduct by tax advisers". https://www.gov.uk/hmrc-internal-manuals/compliance-handbook/ch176100 and https://www.gov.uk/hmrc-internal-manuals/compliance-handbook/ch176140 (accessed 11 October 2026).

Measure the problem (United Kingdom). HMRC's random enquiry program found that around half of small and medium enterprise claims in 2021 to 2022 were non-compliant in part or in full. Its analysis by use of a specialist agent does not distinguish agents by how they were paid.4Source 4HM Revenue and Customs, Approach to Research and Development tax reliefs 2023 to 2024 (published 30 October 2024), sections 1.2 and 2.1 and Annex B, Theme 5. https://www.gov.uk/government/publications/hmrcs-approach-to-research-and-development-tax-reliefs-2023-to-2024/approach-to-research-and-development-tax-reliefs-2023-to-2024 (accessed 11 October 2026).

Penalize those who assist (Canada, Ireland, Singapore). Canada's third party penalty is linked to the adviser's compensation, including amounts receivable contingently; Ireland and Singapore penalize those who deliberately or wilfully assist a false claim.12Source 12Government of Canada, Income Tax Act, RSC 1985, c 1 (5th Supp), section 163.2, subsections 163.2(1), (4) and (5). https://laws-lois.justice.gc.ca/eng/acts/I-3.3/section-163.2.html (accessed 11 October 2026).13Source 13Revenue Commissioners, Notes for Guidance, Taxes Consolidation Act 1997, Finance Act 2025 edition, Part 47, section 1055. https://www.revenue.ie/en/tax-professionals/documents/notes-for-guidance/tca/part47.pdf (accessed 11 October 2026).14Source 14Attorney-General's Chambers, Income Tax Act 1947 (Singapore Statutes Online, current version), section 37S(3) and (4). https://sso.agc.gov.sg/Act/ITA1947?ProvIds=pr37S- (accessed 11 October 2026).

How this compares with the United States

Measure Abroad United States
Fee basis on the claim Canada2Source 2Canada Revenue Agency, T4088, Guide to Form T661 (T4088(E) Rev. 20), Part 9, Claim preparer information, 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). Form 6765 does not ask15Source 15Internal Revenue Service, Instructions for Form 6765 (Rev. December 2025), read in full. https://www.irs.gov/instructions/i6765 (accessed 11 October 2026).
All advisers named UK9Source 9HM Revenue and Customs, Additional information you must submit before you claim Research and Development tax relief, section "Contact details". https://www.gov.uk/guidance/submit-detailed-information-before-you-claim-research-and-development-rd-tax-relief (accessed 11 October 2026). Signing preparer only16Source 16Treasury Department and Internal Revenue Service, 26 CFR 1.6109-2, paragraphs (a)(1) to (a)(3). https://www.ecfr.gov/current/title-26/section-1.6109-2 (accessed 11 October 2026).
Refund paid only to the claimant UK; Ireland for business tax refunds3Source 3HM Revenue and Customs, Corporate Intangibles Research and Development Manual, CIRD81805, "R&D tax relief: conditions to be satisfied: restriction of nominations and assignments". https://www.gov.uk/hmrc-internal-manuals/corporate-intangibles-research-and-development-manual/cird81805 (accessed 11 October 2026).8Source 8Revenue Commissioners, Tax and Duty Manual Part 37-00-04b, Guidelines for Agents or Advisors acting on behalf of taxpayers, section 14. https://www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-37/37-00-04b.pdf (accessed 11 October 2026). Penalty on preparers who negotiate refund checks17Source 17Office of the Law Revision Counsel, 26 U.S.C. 6695, subsection (f), United States Code 2024 edition published by the Government Publishing Office. https://www.govinfo.gov/content/pkg/USCODE-2024-title26/html/USCODE-2024-title26-subtitleF-chap68-subchapB-partI-sec6695.htm (accessed 11 October 2026).
Statutory adviser regulation UK10Source 10HM Revenue and Customs, Check if and when you need to register as a tax adviser with HMRC (last updated 3 September 2026), section "Who needs to register". https://www.gov.uk/guidance/check-if-and-when-you-need-to-register-as-a-tax-adviser-with-hmrc (accessed 11 October 2026). Practitioners only after Loving6Source 6US Court of Appeals for the District of Columbia Circuit, Loving v. Internal Revenue Service, No. 13-5061, decided 11 February 2014, slip opinion pages 2 to 3 and 17 to 18. https://media.cadc.uscourts.gov/opinions/docs/2014/02/13-5061-1479431.pdf (accessed 11 October 2026).
Statutory prohibition of contingent fees None found5Source 5Sources reviewed for this point, none of which contains a prohibition or cap: Government of Canada, Income Tax Act, sections 37 and 162 (https://laws-lois.justice.gc.ca/eng/acts/I-3.3/section-162.html); HMRC, CIRD81805 (https://www.gov.uk/hmrc-internal-manuals/corporate-intangibles-research-and-development-manual/cird81805); Revenue Commissioners, Notes for Guidance, Part 29, section 766C (https://www.revenue.ie/en/tax-professionals/documents/notes-for-guidance/tca/part29.pdf); Income Tax Act 1947 (Singapore), section 37S (https://sso.agc.gov.sg/Act/ITA1947?ProvIds=pr37S-) (all accessed 11 October 2026). None; Circular 230 restricts practitioners only18Source 18Treasury Department, Circular No. 230, 31 CFR 10.27, Fees, paragraphs (b) and (c). https://www.ecfr.gov/current/title-31/subtitle-A/part-10/subpart-B/section-10.27 (accessed 11 October 2026).

What the record shows and does not show

The measures fall into three groups: those that give the tax authority information, those that act on the flow of money, and those that penalize advisers after a claim goes wrong. None acts on the fee before the claim is prepared. No official evaluation of any of them by fee arrangement was found, and no analysis of Canada's billing data was found. The record shows what other countries did and the reasons they gave, not what the measures achieved.

A fair counterargument is that the United States could try these less restrictive measures first. The answer is that disclosure and payment controls leave the fee calculated on the credit in place, and the UK adviser regime rests on statutory powers the IRS does not have.6Source 6US Court of Appeals for the District of Columbia Circuit, Loving v. Internal Revenue Service, No. 13-5061, decided 11 February 2014, slip opinion pages 2 to 3 and 17 to 18. https://media.cadc.uscourts.gov/opinions/docs/2014/02/13-5061-1479431.pdf (accessed 11 October 2026).

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. This recommendation concerns the United States only. 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.

References

  1. 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
  2. Canada Revenue Agency, T4088, Guide to Form T661 (T4088(E) Rev. 20), Part 9, Claim preparer information, 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
  3. HM Revenue and Customs, Corporate Intangibles Research and Development Manual, CIRD81805, "R&D tax relief: conditions to be satisfied: restriction of nominations and assignments". https://www.gov.uk/hmrc-internal-manuals/corporate-intangibles-research-and-development-manual/cird81805 (accessed 11 October 2026).    Back
  4. HM Revenue and Customs, Approach to Research and Development tax reliefs 2023 to 2024 (published 30 October 2024), sections 1.2 and 2.1 and Annex B, Theme 5. https://www.gov.uk/government/publications/hmrcs-approach-to-research-and-development-tax-reliefs-2023-to-2024/approach-to-research-and-development-tax-reliefs-2023-to-2024 (accessed 11 October 2026).   Back
  5. Sources reviewed for this point, none of which contains a prohibition or cap: Government of Canada, Income Tax Act, sections 37 and 162 (https://laws-lois.justice.gc.ca/eng/acts/I-3.3/section-162.html); HMRC, CIRD81805 (https://www.gov.uk/hmrc-internal-manuals/corporate-intangibles-research-and-development-manual/cird81805); Revenue Commissioners, Notes for Guidance, Part 29, section 766C (https://www.revenue.ie/en/tax-professionals/documents/notes-for-guidance/tca/part29.pdf); Income Tax Act 1947 (Singapore), section 37S (https://sso.agc.gov.sg/Act/ITA1947?ProvIds=pr37S-) (all accessed 11 October 2026).    Back
  6. US Court of Appeals for the District of Columbia Circuit, Loving v. Internal Revenue Service, No. 13-5061, decided 11 February 2014, slip opinion pages 2 to 3 and 17 to 18. https://media.cadc.uscourts.gov/opinions/docs/2014/02/13-5061-1479431.pdf (accessed 11 October 2026).    Back
  7. 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
  8. Revenue Commissioners, Tax and Duty Manual Part 37-00-04b, Guidelines for Agents or Advisors acting on behalf of taxpayers, section 14. https://www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-37/37-00-04b.pdf (accessed 11 October 2026).   Back
  9. HM Revenue and Customs, Additional information you must submit before you claim Research and Development tax relief, section "Contact details". https://www.gov.uk/guidance/submit-detailed-information-before-you-claim-research-and-development-rd-tax-relief (accessed 11 October 2026).   Back
  10. HM Revenue and Customs, Check if and when you need to register as a tax adviser with HMRC (last updated 3 September 2026), section "Who needs to register". https://www.gov.uk/guidance/check-if-and-when-you-need-to-register-as-a-tax-adviser-with-hmrc (accessed 11 October 2026).   Back
  11. HM Revenue and Customs, Compliance Handbook, CH176100 and CH176140, "Sanctionable conduct by tax advisers". https://www.gov.uk/hmrc-internal-manuals/compliance-handbook/ch176100 and https://www.gov.uk/hmrc-internal-manuals/compliance-handbook/ch176140 (accessed 11 October 2026).  Back
  12. Government of Canada, Income Tax Act, RSC 1985, c 1 (5th Supp), section 163.2, subsections 163.2(1), (4) and (5). https://laws-lois.justice.gc.ca/eng/acts/I-3.3/section-163.2.html (accessed 11 October 2026).  Back
  13. Revenue Commissioners, Notes for Guidance, Taxes Consolidation Act 1997, Finance Act 2025 edition, Part 47, section 1055. https://www.revenue.ie/en/tax-professionals/documents/notes-for-guidance/tca/part47.pdf (accessed 11 October 2026).  Back
  14. Attorney-General's Chambers, Income Tax Act 1947 (Singapore Statutes Online, current version), section 37S(3) and (4). https://sso.agc.gov.sg/Act/ITA1947?ProvIds=pr37S- (accessed 11 October 2026).  Back
  15. Internal Revenue Service, Instructions for Form 6765 (Rev. December 2025), read in full. https://www.irs.gov/instructions/i6765 (accessed 11 October 2026).  Back
  16. Treasury Department and Internal Revenue Service, 26 CFR 1.6109-2, paragraphs (a)(1) to (a)(3). https://www.ecfr.gov/current/title-26/section-1.6109-2 (accessed 11 October 2026).  Back
  17. Office of the Law Revision Counsel, 26 U.S.C. 6695, subsection (f), United States Code 2024 edition published by the Government Publishing Office. https://www.govinfo.gov/content/pkg/USCODE-2024-title26/html/USCODE-2024-title26-subtitleF-chap68-subchapB-partI-sec6695.htm (accessed 11 October 2026).  Back
  18. Treasury Department, Circular No. 230, 31 CFR 10.27, Fees, paragraphs (b) and (c). https://www.ecfr.gov/current/title-31/subtitle-A/part-10/subpart-B/section-10.27 (accessed 11 October 2026).  Back