Fee disclosure models

1Summary

Disclosure is often proposed as the first response to a conflict of interest in how advisers are paid. It is less intrusive than a prohibition, it leaves pricing to the market, and it gives clients and regulators information they did not have. This paper compares the main fee disclosure designs used in tax administration and in other regulated professions.

In tax, Canada requires every SR&ED claim to report each paid claim preparer, the billing arrangement, the rate and the fee, with a penalty for missing or inaccurate information.12 The United Kingdom requires R&D claimants to give the contact details of every agent involved in a claim, but not the fee.3 The federal research credit form asks for neither.4 In other professions, United States lawyers must put contingent fee agreements in writing with the method of calculation, investment advisers must give retail investors a short standardized summary that explains the conflicts their fees create, and solicitors in England and Wales must publish price information for some services.567

The paper finds that the designs differ in audience, timing and content, and that disclosure informs without changing the incentive a fee creates. It also finds that several of the same regulators that require disclosure prohibit contingent or outcome-based pay in defined settings.589 The case for relying on disclosure alone is set out in its strongest form and then answered. Swanson Reed's position is stated once, in a labeled box.

2What fee disclosure is for

A fee disclosure rule can serve three different purposes, and the design follows from the purpose.

Informing the client. The client learns how the adviser will be paid before it agrees, and can compare offers or negotiate. The audience is the client, and the timing is before the engagement.
Informing the regulator. The tax authority or regulator learns how the adviser was paid and can use that information to select cases for review or to study the market. The audience is the authority, and the timing is when the claim or report is filed.
Informing the market. Prices are published so that clients can compare advisers before they make contact. The audience is the public.

The design choices that follow are who receives the information, when, what it contains (the basis of the fee, the rate, the amount, or an explanation of the incentive), and what happens if it is missing or wrong.

3Disclosure in tax administration

3.1Canada: disclosure to the CRA on every SR&ED claim

Canada's federal government consulted in 2012 on contingency fees for SR&ED claims, and the measure that followed in Budget 2013 required more detailed information about preparers and billing arrangements on claim forms. The budget said that "This information will facilitate the identification of SR&ED program claims with a higher risk of non-compliance."10

The rule is now in the Income Tax Act. The prescribed SR&ED form must contain claim preparer information, defined as prescribed information about the identity of the claim preparer and "the arrangement under which the claim preparer agrees to accept consideration in respect of the preparation of the form".2 Part 9 of Form T661 asks, for each preparer, the name, business number, a billing arrangement code, the billing rate and the total fee paid, payable or expected to be paid. Code 1 is a "Contingency fee arrangement", where the fee is based on a percentage of the investment tax credit earned.1 Where no preparer was engaged, the claimant certifies that.1

A false statement or omission in the claim preparer information carries a penalty of 1,000 dollars, for which the claimant and any claim preparer are jointly and severally, or solidarily, liable, with a due diligence defense for the preparer.2 The CRA has told claimants to "Be leery of any preparer who asks you to omit this information from your claim."11

This is the most complete tax disclosure model identified for this paper: it goes to the authority, on every claim, and covers basis, rate and amount. It does not restrict the fee. No published CRA evaluation of what the disclosure has changed, and no published statistics drawn from it, were identified.

3.2United Kingdom: identity of agents, not fees

In the United Kingdom, a company claiming R&D relief must submit an additional information form. HMRC's guidance says it must include the contact details of "all agents involved in the R&D claim", including any agent who has given advice, analyzed costs, helped prepare technical assessments, or completed the online forms or the company tax return.312 The form does not ask how agents are paid.12

HMRC's published approach addresses fees through guidance to claimants. It advises a customer considering an agent to "read the terms and conditions, read any disclaimers carefully, and make sure they fully understand any fees the agent will charge", and reports that more than 90 percent of claimants have an authorized agent.13 HMRC also changed how relief is paid: from April 2024, R&D agents can no longer receive clients' R&D tax credit payments through nominations, subject to limited exceptions, a change HMRC said would reduce "the financial incentive for agents to overstate claims".13

3.3United States: no fee question on the claim

The federal research credit is claimed on Form 6765. Its instructions ask for detailed information, including by business component in Section G, which is required, subject to exceptions, for tax years beginning after 2025.4 The instructions do not ask whether a paid adviser prepared the credit calculation or how that adviser was paid.4 The IRS can see what was claimed but not the fee basis on which it was prepared.

Treasury's rules for practitioners address fee information in a different way. Circular 230 permits a practitioner to publish the availability of a written schedule of fees and to disseminate fixed fees for specific routine services, hourly rates, a range of fees for particular services and the fee for an initial consultation. A statement of fee information about matters in which costs may be incurred must say whether clients will be responsible for those costs, and a practitioner may charge no more than the published rates for at least 30 calendar days after the schedule was last published.14 These rules govern fee advertising. They do not require disclosure to the IRS on a claim. Circular 230 separately restricts contingent fees for preparing returns and refund claims.15

4Disclosure in other regulated professions

4.1Lawyers in the United States: a written agreement, and limits

The ABA Model Rules of Professional Conduct require that "the basis or rate of the fee and expenses for which the client will be responsible shall be communicated to the client, preferably in writing", before or within a reasonable time after the representation begins.5 For contingent fees the requirements are stricter. A contingent fee agreement "shall be in a writing signed by the client" and must state the method by which the fee is determined, including the percentage or percentages that accrue to the lawyer at settlement, trial or appeal, the expenses to be deducted, and whether they are deducted before or after the fee is calculated. At the end of the matter, the lawyer must give the client a written statement of the outcome and, if there is a recovery, the remittance to the client and how it was determined.5

The same rule prohibits contingent fees in two categories: domestic relations matters where payment depends on securing a divorce or on the amount of alimony, support or a property settlement, and the representation of a defendant in a criminal case.5 The Model Rules thus combine disclosure as the general rule with prohibition where the profession judged the outcome-based fee inappropriate.

4.2Solicitors in Ontario: a prescribed statement

The Department of Finance's 2012 consultation paper on SR&ED contingency fees described Ontario's rules for solicitors' contingency fee agreements as an example. It said they require a signed statement confirming, among other things, that the solicitor and client have discussed other options such as an hourly rate retainer, that hourly rates may vary among solicitors and the client can speak with other solicitors to compare, how the fee is determined "using a simple example", and how the agreement can be terminated.16 That design aims at the client's decision. It requires the client to be told of alternatives, not only of the chosen fee.

4.3Solicitors in England and Wales: published prices

The Solicitors Regulation Authority's Transparency Rules require firms that offer certain services, such as residential conveyancing, uncontested probate, some immigration matters and employment tribunal claims, to publish cost information on their websites.7 The information must include the total cost or a range, "the basis for your charges, including any hourly rates or fixed fees", the services included, and, where conditional fee or damages-based agreements are used, "the circumstances in which clients may have to make any payments themselves for your services (including from any damages)".7 It must be "clear and accessible and in a prominent place".7 This is disclosure to the market, before any contact with the client.

4.4Investment advisers in the United States: explain the incentive

Registered investment advisers must deliver Form CRS, a relationship summary, to each retail investor before or at the time of entering into an advisory contract, and post it on their website.17 The instructions limit the paper form to two pages for a firm that is only a broker-dealer or only an investment adviser.6

Form CRS goes further than stating the fee. Under the heading "What fees will I pay?", a firm must summarize its principal fees and costs "and the conflicts of interest they create". The instructions give an example for an adviser that charges an asset-based fee: a statement that "the more assets there are in a retail investor's advisory account, the more a retail investor will pay in fees, and the firm may therefore have an incentive to encourage the retail investor to increase the assets in his or her account".6 Firms must also include set questions for the investor to ask, such as "How might your conflicts of interest affect me, and how will you address them?"6

Federal law also limits outcome-based pay for investment advisers. Section 205(a)(1) of the Investment Advisers Act prohibits a registered adviser from entering into a contract that "provides for compensation to the investment adviser on the basis of a share of capital gains upon or capital appreciation of the funds" of the client.8 An SEC rule exempts contracts with a "qualified client", defined by reference to assets under management or net worth above amounts set by order.18 The result is disclosure for every retail client and a prohibition on performance-based pay except for clients the rule treats as able to bear it.

4.5Financial advisers in the United Kingdom: disclosure, then bans

The Financial Conduct Authority (FCA) requires a firm giving personal recommendations to retail clients to "disclose its charging structure to a retail client in writing, in good time before making the personal recommendation".19 Its guidance says the disclosure should be in clear and plain language and, as far as practicable, in cash terms, with examples in cash terms where the structure is not.19 The same section requires firms to be remunerated for personal recommendations only by adviser charges, and not to solicit or accept other commissions, remuneration or benefits in connection with advising, subject to transitional exceptions.19

For one category of advice, the FCA went further. Since 1 October 2020, its rules on advice about pension transfers and conversions have banned contingent charging, subject to narrow exceptions.920 The rules state their purpose: "to ensure that firms' charging structures ... do not create any potential for a conflict of interest relating to, or an incentive to recommend or effect, a pension transfer".9 A firm must ensure that both the method of calculating and the total value of its charges "do not vary depending on whether or not" it recommends a transfer or the client transfers.9 The exceptions apply where the firm is satisfied on reasonable grounds that the client cannot pay without using funds that are not reasonably available and is in serious financial difficulty or serious ill health, as the rules define them.9

The FCA explained its reasons in its policy statement. It said respondents "were evenly split" on a ban, and that "Those opposed to a ban did not provide any compelling evidence that an alternative approach would be more effective."20 It found "a high level of disclosures which do not comply with our rules", and said that contingent charges "may not be obvious to many consumers as they are only paid from the transferred funds".20 It acknowledged that "it is difficult to prove statistically a causal link between contingent charging and suitability", and gave as one reason for proceeding that "a ban places a value on advice itself rather than on a transaction so helps to enhance market integrity".20

4.6Lobbyists in Canada: a ban beside a disclosure regime

Canada's own law shows both tools side by side. The Lobbying Act prohibits a consultant lobbyist from receiving any payment "that is in whole or in part contingent on the outcome" of the matters lobbied, and prohibits the client from making one.21 The 2012 SR&ED consultation paper cited that prohibition as an example, alongside other Canadian rules.16 For SR&ED claim preparers, Canada chose disclosure.10

5The designs compared

Model	Audience	Timing	Content	Consequence	Limit on outcome-based pay
Canada, Form T661 Part 9	Tax authority	At filing	Identity, billing code, rate, total fee1	1,000 dollar penalty, joint2	None identified2
UK, additional information form	Tax authority	Before or at claim	Agent contact details3	Claim not valid without the form12	None in the form; nominations ended13
US, Form 6765	Tax authority	At filing	No preparer or fee question4	Not applicable	Circular 230 restricts contingent fees for practitioners15
US, Circular 230 fee advertising	Public	Before contact	Optional published schedule14	Must honor published rates for 30 days14	Separate restriction in section 10.2715
US lawyers, Model Rule 1.5	Client	Before or early; closing statement	Basis or rate; for contingent fees, method, percentages, expenses5	Professional discipline	Prohibited in some matters5
England and Wales solicitors	Public	Before contact	Price, basis, inclusions, CFA or DBA circumstances7	Regulatory	Not in these rules
US investment advisers, Form CRS	Client	Before or at contract	Fees and the conflicts they create, in two pages176	Regulatory	Performance fees prohibited except for qualified clients818
UK financial advice, FCA	Client	In good time before advice	Charging structure, in cash terms where practicable19	Regulatory	Commission ban; contingent charging banned for pension transfers199

6What disclosure can and cannot do

6.1What it can do

Disclosure tells someone something they did not know. Disclosure to the authority, as in Canada, lets the authority use the fee basis in selecting claims for review, which is the purpose Canada stated.10 Disclosure to the client, as in the lawyer and investment adviser rules, lets the client decide with knowledge of the fee and, under Form CRS, of the incentive it creates.56 Disclosure to the market lets clients compare before they engage.7

Disclosure on a claim also creates a record. A question on the claim form, answered on every claim, would allow the fee basis to be studied with official data. Canada has collected that data since 2014, although no published analysis of it was identified for this paper.1

6.2What it cannot do

Disclosure does not change how a fee is calculated. A fee calculated as a percentage of the credit rises with the credit whether or not the client has been told so. The client may understand the incentive and still accept it, especially where the alternative is an upfront cost it cannot meet.

Disclosure also depends on compliance and comprehension. The FCA found a high level of non-compliant disclosures in pension transfer advice, and said contingent charges may not be obvious to consumers when they are paid from the transferred funds.20 A research credit fee paid from the credit has the same feature: the business may not experience it as a cost until the credit arrives.

And disclosure to the client does not reach the cost borne by others. When a research credit claim is overstated, the cost of review falls partly on the IRS, and the incentive operates in judgments that the client may not be able to evaluate. The Canadian consultation paper made a similar point when it noted that, if the criticism of contingency fees were true, the practice "would increase the costs for the Canada Revenue Agency to administer the SR&ED tax incentive program".16

6.3Where regulators paired disclosure with limits

The comparison shows a pattern. Each of the following regulators requires fee disclosure, and each also limits outcome-based pay in defined settings:

the ABA Model Rules, which prohibit contingent fees in some domestic relations and criminal matters;5
the Investment Advisers Act, which prohibits performance-based pay except for qualified clients;818
the FCA, which banned commission for retail investment advice and contingent charging for pension transfer advice;199
Canada's Lobbying Act, which prohibits contingent payments to consultant lobbyists.21

In each case the limit applies where the regulator judged that the outcome-based fee created an incentive that disclosure would not adequately control. The FCA said so expressly, and added that its other measures would be "significantly less effective" unless a ban on contingent charging was part of the package.20

7The case for disclosure alone

The case for relying on disclosure rather than prohibition deserves to be stated in its strongest form.

It preserves choice. Businesses that want to pay only if a credit results can still do so. A prohibition removes that option for everyone, including businesses for whom it is the only practical way to claim.

It targets the problem. If the concern is that some claims are inflated, disclosure to the authority lets it focus review on those claims. Canada's measure was designed for exactly that purpose.10

It generates evidence. Disclosure on every claim would show how common contingent fees are and how claims prepared under them fare, which no official source now shows.4 Policy could then follow the evidence.

It is proportionate. Many advisers who charge contingent fees prepare sound claims. A prohibition treats all of them as a risk. Disclosure treats none of them as a wrongdoer.

It has precedent in tax. Canada, after studying the question, chose disclosure for SR&ED claims.10

These are serious arguments. Nothing in this paper suggests that advisers who charge contingent fees act improperly.

8Answering the case

8.1Choice and access

The access argument is an argument for low upfront cost. Fixed, capped and staged fees can provide that without calculating the fee as a share of the credit. The FCA's pension transfer ban shows one way to protect those who genuinely cannot pay upfront: narrow exceptions defined by financial difficulty, rather than a general permission.9

8.2Targeting and evidence

Disclosure to the IRS would be useful, and it would generate evidence that does not now exist. But identifying higher risk claims after they are filed does not change the incentive at the point where the claim is prepared. Canada has collected billing data on every SR&ED claim since 2014, yet no published evaluation of its effect was identified for this paper.1

8.3Proportionality

A prohibition on a fee structure is not a finding about the people who use it. The ABA Model Rules do not assume that lawyers in divorce cases act improperly; they remove a fee structure whose incentive the profession judged inappropriate for that setting.5 The FCA said the same of pension transfer advice: there was "a clear conflict of interest" where the only outcomes were to transfer or not.20 A research credit claim is not a binary outcome, but each judgment within it moves the credit, and the fee, in one direction or the other.

8.4Precedent

Canada's choice for SR&ED is a fact about Canada and is not a recommendation for it. Canada also prohibits contingent payments to consultant lobbyists.21 Regulators in several professions have treated disclosure and prohibition as complementary rather than as alternatives.589

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 paper, is a fixed-fee R&D tax adviser. It has a direct commercial interest in the outcome: it does not charge success fees, and a ban would remove a pricing model it competes against.

9What the record shows

The record supports these points.

Fee disclosure designs vary in audience, timing, content and consequence.1567
Canada requires the fee basis, rate and amount on every SR&ED claim; the United Kingdom requires agents' identities but not fees; the federal research credit form requires neither.134
Form CRS requires investment advisers to explain the conflicts their fees create, not only the fees.6
The ABA Model Rules, the Investment Advisers Act, the FCA and Canada's Lobbying Act each combine disclosure with limits on outcome-based pay in defined settings.5819921
The FCA found widespread non-compliant disclosure in pension transfer advice and banned contingent charging there.20

The record does not show how disclosure of fee arrangements has affected the accuracy of R&D tax claims in any country. No published evaluation of Canada's Part 9 disclosure was identified for this paper.

References

Canada Revenue Agency, Form T661, Scientific Research and Experimental Development (SR&ED) Expenditures Claim, T661 E (26), Part 9, Claim preparer information, lines 935 to 975 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
HM Revenue and Customs, Additional information you must submit before you claim Research and Development tax relief, section "Contact details" and update history. https://www.gov.uk/guidance/submit-detailed-information-before-you-claim-research-and-development-rd-tax-relief (accessed 11 October 2026). Back
Internal Revenue Service, Instructions for Form 6765 (Rev. December 2025) (page last reviewed or updated 30 April 2026), What's New and Section G. https://www.irs.gov/instructions/i6765 (accessed 11 October 2026). Back
American Bar Association, Model Rules of Professional Conduct, Rule 1.5, Fees, paragraphs (b), (c) and (d). Archived copy of the ABA page captured 2 September 2026. https://web.archive.org/web/20260902195945/https://www.americanbar.org/groups/professional_responsibility/publications/model_rules_of_professional_conduct/rule_1_5_fees/ (accessed 11 October 2026). Back
Securities and Exchange Commission, Form CRS instructions, General Instruction 1.C and Item 3, "Fees, Costs, Conflicts, and Standard of Conduct". https://www.sec.gov/files/formcrs.pdf (accessed 11 October 2026). Back
Solicitors Regulation Authority, SRA Transparency Rules (version in effect from 11 April 2025), rules 1.1 to 1.6. https://www.sra.org.uk/solicitors/standards-regulations/transparency-rules/ (accessed 11 October 2026). Back
Office of the Law Revision Counsel, 15 U.S.C. 80b-5, Investment advisory contracts, subsection (a)(1), United States Code 2024 edition published by the Government Publishing Office. https://www.govinfo.gov/content/pkg/USCODE-2024-title15/html/USCODE-2024-title15-chap2D-subchapII-sec80b-5.htm (accessed 11 October 2026). Back
Financial Conduct Authority, FCA Handbook, COBS 19.1B, Ban on contingent charging for pension transfers and conversions (last updated 1 October 2020), purpose, general rule and exceptions. https://www.handbook.fca.org.uk/handbook/COBS/19/1B.html (accessed 11 October 2026). Back
Department of Finance Canada, Economic Action Plan 2013 (Budget 2013), Annex 2, Tax Measures: Supplementary Information, section "Scientific Research and Experimental Development Program". Archived copy captured 20 December 2013. https://web.archive.org/web/20131220170359/http://www.budget.gc.ca/2013/doc/plan/anx2-eng.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, 30 May 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
HM Revenue and Customs, Corporate Intangibles Research and Development Manual, CIRD182000, "R&D Tax Reliefs: reformed reliefs: claims process: additional information form", sections "Statutory framework" and "What information is required". https://www.gov.uk/hmrc-internal-manuals/corporate-intangibles-research-and-development-manual/cird182000 (accessed 11 October 2026). Back
HM Revenue and Customs, Approach to Research and Development tax reliefs 2023 to 2024 (published 30 October 2024), sections 2.1 and 2.5. 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
Treasury Department, Circular No. 230, 31 CFR 10.30, Solicitation, paragraph (b). https://www.ecfr.gov/current/title-31/subtitle-A/part-10/subpart-B/section-10.30 (accessed 11 October 2026). Back
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
Department of Finance Canada, Consultation Regarding the Impact of Contingency Fees on the Effectiveness of the Scientific Research and Experimental Development Tax Incentive Program (2012), sections "Use of Third Parties to Prepare SR&ED Claims" and "Examples of Restrictions in Canada and Other Countries". Archived copy captured 7 May 2013. https://web.archive.org/web/20130507033404/http://www.fin.gc.ca/activty/consult/sred-rsde-eng.asp (accessed 11 October 2026). Back
Securities and Exchange Commission, 17 CFR 275.204-5, Delivery of Form CRS, paragraphs (a) and (b). https://www.ecfr.gov/current/title-17/section-275.204-5 (accessed 11 October 2026). Back
Securities and Exchange Commission, 17 CFR 275.205-3, Exemption from the compensation prohibition of section 205(a)(1) for investment advisers, paragraphs (a) and (d)(1). https://www.ecfr.gov/current/title-17/section-275.205-3 (accessed 11 October 2026). Back
Financial Conduct Authority, FCA Handbook, COBS 6.1A, Adviser charging and remuneration, COBS 6.1A.4R, 6.1A.17R, 6.1A.18G and the guidance on clear and plain language and cash terms. https://www.handbook.fca.org.uk/handbook/COBS/6/1A.html (accessed 11 October 2026). Back
Financial Conduct Authority, PS20/6, Pension transfer advice: feedback on CP19/25 and our final rules and guidance (June 2020), paragraphs 1.5 to 1.9 and 1.20 and Chapter 2, "Our response" following paragraph 2.18. https://www.fca.org.uk/publication/policy/ps20-06.pdf (accessed 11 October 2026). Back
Government of Canada, Lobbying Act, RSC 1985, c 44 (4th Supp), section 10.1. https://laws-lois.justice.gc.ca/eng/acts/L-12.4/page-2.html (accessed 11 October 2026). Back

Cite this paper

Summary

1Summary

2What fee disclosure is for

3Disclosure in tax administration

3.1Canada: disclosure to the CRA on every SR&ED claim

3.2United Kingdom: identity of agents, not fees

3.3United States: no fee question on the claim

4Disclosure in other regulated professions

4.1Lawyers in the United States: a written agreement, and limits

4.2Solicitors in Ontario: a prescribed statement

4.3Solicitors in England and Wales: published prices

4.4Investment advisers in the United States: explain the incentive

4.5Financial advisers in the United Kingdom: disclosure, then bans

4.6Lobbyists in Canada: a ban beside a disclosure regime

5The designs compared

6What disclosure can and cannot do

6.1What it can do

6.2What it cannot do

6.3Where regulators paired disclosure with limits

7The case for disclosure alone

8Answering the case

8.1Choice and access

8.2Targeting and evidence

8.3Proportionality

8.4Precedent

9What the record shows

References

About this paper

Cite this paper

Summary

1Summary

2What fee disclosure is for

3Disclosure in tax administration

3.1Canada: disclosure to the CRA on every SR&ED claim

3.2United Kingdom: identity of agents, not fees

3.3United States: no fee question on the claim

4Disclosure in other regulated professions

4.1Lawyers in the United States: a written agreement, and limits

4.2Solicitors in Ontario: a prescribed statement

4.3Solicitors in England and Wales: published prices

4.4Investment advisers in the United States: explain the incentive

4.5Financial advisers in the United Kingdom: disclosure, then bans

4.6Lobbyists in Canada: a ban beside a disclosure regime

5The designs compared

6What disclosure can and cannot do

6.1What it can do

6.2What it cannot do

6.3Where regulators paired disclosure with limits

7The case for disclosure alone

8Answering the case

8.1Choice and access

8.2Targeting and evidence

8.3Proportionality

8.4Precedent

9What the record shows

References

About this paper

Related papers