International lessons for US policy

1Summary

The United States is not the only country that rewards research and development through its tax system, and it is not the only one in which outside advisers prepare many of the claims. The United Kingdom, Ireland, Canada and Singapore each run their own incentive, and several have taken measures aimed at how claims are prepared and how the people who prepare them are paid.

This paper asks what those measures suggest for federal policy on the research credit under Section 41. It describes each country's measures factually, from official sources. It makes no recommendation for any of those countries. Its only recommendation, stated once in a labeled box, is for the United States.

Three findings stand out. Canada has collected each claim preparer's billing arrangement, including any contingency fee, on its claim form since 2014.12 The United Kingdom has stopped paying R&D tax credits to agents, saying this reduces "the financial incentive for agents to overstate claims".34 And none of the four countries has been found to prohibit contingent fees for R&D claims by statute.5 The measures abroad show that the incentive is widely recognized and that parts of it can be addressed administratively. They also show that no country has yet addressed the fee itself by law.

2Why look abroad, and the limits of doing so

The value of comparison is practical. Measures that have been designed, legislated and administered elsewhere show what is workable and what problems administrators thought worth solving.

The limits are real. The incentives differ in design: some are refundable, some are deductions, some pass through a separate registration with another agency. Professional regulation differs, and so does the constitutional and statutory authority of each tax administration. In the United States, the D.C. Circuit held in 2014 that Treasury's authority over practice before it does not extend to regulating tax return preparers, and said wider regulation "is a decision for Congress and the President".6 A measure that a foreign tax authority can adopt by guidance may need legislation here.

No official source found for this paper evaluates any of the measures below by comparing claims prepared under different fee arrangements. The paper therefore describes what each country did and why it said it did it, not what the measures achieved.

3Measure 1: disclose the fee on the claim (Canada)

The Income Tax Act requires the prescribed SR&ED form to contain claim preparer information, defined as information about the identity of each claim preparer and "the arrangement under which the claim preparer agrees to accept consideration".71 On Form T661, the claimant states whether a claim preparer was engaged in any way and, for each one, gives the name, business number, a billing arrangement code (including a contingency fee calculated as a percentage of the credit earned, an hourly rate or a flat fee), the billing rate and the total fee paid, payable or expected to be paid.2 A false statement or omission in that information attracts a $1,000 penalty for which the claimant and any claim preparer are jointly and severally liable, with a due diligence defense for the preparer.1

The measure followed directly from concern about fees. Canada's 2012 budget announced a study "to better understand the practice of businesses hiring consultants on a contingency-fee basis" to prepare SR&ED claims, "and to determine whether any action is required".8 The 2013 budget then required each preparer's business number and billing arrangements, "including whether contingency fees were used", for claims filed on or after 1 January 2014.9

What it suggests. Fee disclosure on a claim form is administrable: Canada has done it for more than a decade. It gives a tax authority a record of how claims are paid for. It does not change the incentive, and no official publication found for this paper reports what the Canadian data shows.

In the United States, Form 6765 does not ask how a claim was prepared or paid for, and its instructions make no reference to a preparer.10 Treasury has itself proposed a $500 penalty on taxpayers who fail to disclose the use of a paid preparer "and the fees paid to such a preparer".11

4Measure 2: control where the money goes (United Kingdom and Ireland)

For R&D claims made on or after 1 April 2024, HMRC will generally pay R&D tax credits only to the claimant company, and new assignments of R&D tax credit payments made on or after 22 November 2023 are void.3 HMRC said the change means agents can no longer receive their clients' credits through nominations, so payments go directly to the company, and that this "will help reduce non-compliance within the scheme by reducing the financial incentive for agents to overstate claims". It added that more than 90 percent of claims that are fraudulent or show markers of fraud use nominee bank accounts.4

Ireland's guidelines for agents state that agents and advisers "are not permitted to directly receive refunds in respect of their clients' business taxes".12

What it suggests. Controlling the flow of the refund removes one way a fee can be taken before the taxpayer sees the money. It does not change how the fee is calculated. US law already penalizes a tax return preparer who endorses or negotiates a refund check issued to a taxpayer.13

5Measure 3: name every adviser involved (United Kingdom)

Since 2023, every UK R&D claim must be supported by an additional information form, and some companies must notify HMRC before claiming. HMRC's guidance asks for the contact details of all agents involved, including any agent who has given advice, analyzed costs or helped prepare technical assessments.1415 A claim without the required additional information is invalid.16

What it suggests. The United Kingdom names the advisers behind the calculation, not only the person who files. In the United States the return identifies the signing preparer.17 A person who prepares the credit calculation without signing may be a nonsigning preparer under the regulations, but the return does not record that person.18

6Measure 4: regulate paid advisers by statute (United Kingdom)

The United Kingdom now requires anyone who interacts with HMRC about someone else's tax affairs and is paid for it to register for an agent services account, introduced in stages.19 Since 1 April 2026, HMRC can penalize tax advisers for sanctionable conduct, meaning conduct intended to bring about a loss of tax revenue, with penalties of up to 100 percent of the potential lost revenue for repeated cases and publication of advisers penalized more than £7,500.2021

What it suggests. The United Kingdom regulates paid advisers through legislation. In the United States, Treasury's attempt to regulate all paid preparers by regulation was struck down in Loving, and proposals to give it that authority by statute have not been enacted.61122 The UK adviser regime does not prohibit a particular fee basis.5

7Measure 5: measure the problem (United Kingdom)

HMRC introduced a Mandatory Random Enquiry Programme for claims by small and medium enterprises to give it a more accurate picture of non-compliance. It reported that in 2021 to 2022 around half of claims from small and medium enterprises were non-compliant in part or in full.4 It also published analysis by whether a specialist R&D agent was used: around half of companies used one, and non-compliance, as a value of claims, was slightly higher in claims submitted with one.4 That analysis does not distinguish agents by how they were paid.4

What it suggests. Random enquiries give an estimate of error that does not depend on which claims were selected for review. In the United States, the IRS's published corporation research credit tables run only to tax year 2014, and no official source reports outcomes by preparer type or fee arrangement.2310

8Measure 6: check claims before they are made (several countries)

Several countries require a step before the claim. A UK company that has not claimed within the previous three years must generally notify HMRC within six months after the end of its period of account.14 An Irish company claiming for the first time, or after three accounting periods without a claim, must notify Revenue at least 90 days before claiming.24

What it suggests. Pre-claim steps give the tax authority notice of new claimants and, in some cases, an early view of the activities. They are not aimed at fees.

9Measure 7: penalties on those who assist, linked to their pay (Canada, Ireland and Singapore)

Several countries reach advisers through penalties on anyone who helps another person make a false claim. Canada's third party penalty applies to a person who makes or participates in a false statement on behalf of another person, knowing it is false or in circumstances amounting to culpable conduct. The penalty is the greater of $1,000 and the lesser of the other person's penalty and $100,000 plus the person's "gross compensation" in respect of the statement, defined to include amounts the person is entitled to receive "either absolutely or contingently".25 An adviser is not treated as culpable solely because it relied in good faith on information from the client.25

Ireland imposes a penalty of €4,000 on any person who deliberately assists in or induces the making of an incorrect corporation tax return.26 Singapore's offences for false information in an Enterprise Innovation Scheme cash payout extend to anyone who acts "to assist another person to obtain" a payout that is not due, with a penalty of three times the payout involved, or four times where false records or fraud are used.27

What it suggests. Measuring a penalty by the adviser's compensation, as Canada does, ties the adviser's exposure to what the adviser earned from the claim. The US preparer penalty takes a similar approach: it is the greater of a fixed sum or a percentage of the income the preparer derived from the return or claim.28 Like all of these penalties, it applies only after the event and only on proof of fault.

10Singapore: a reviewer, not a preparer

Singapore asks a different question from the others. Since the year of assessment 2021, its corporate income tax return has asked whether the return was reviewed by an accredited tax professional, and for the reviewer's particulars.29 IRAS states that it uses the information "for profiling purpose to better understand our taxpayers".30 The R&D Claim Form itself asks for a technical contact for each project and is declared by an authorized person of the company, with no field for an adviser or a fee.31

What it suggests. Singapore uses adviser information as a risk signal rather than as a basis for liability. It is a reminder that information about who prepared a claim has value to a tax authority even where no penalty attaches to it.

11How the measures fit together

Read together, the measures fall into three groups. The first group gives the tax authority information: Canada's fee disclosure, the UK adviser fields, Singapore's reviewer question and the UK's random enquiries. The second group acts on the money: the UK's restriction on nominations and Ireland's bar on agents receiving business tax refunds. The third group acts on the adviser after the event: the UK's sanctionable conduct regime, and the penalties on those who assist in Canada, Ireland and Singapore.

None of the groups acts on the fee before the claim is prepared. Information measures reveal the fee without changing it. Money measures change who receives the refund, not how the fee is calculated. Penalty measures depend on proving fault once a claim has gone wrong. Of the measures discussed in this paper, only a prohibition, the subject of the position stated later, would act on the fee itself.

12Figure 1: measures compared

Measure	Countries	Aimed at the fee itself?	Comparable US rule
Fee basis disclosed on the claim	Canada2	Disclosure only	None on Form 676510
Credit paid only to the claimant	United Kingdom; Ireland for business tax refunds312	No, the payment flow	Penalty on negotiating refund checks13
All advisers named	United Kingdom15	No	Signing preparer only17
Statutory regulation of paid advisers	United Kingdom19	No	Practitioners only after Loving6
Random enquiry measurement	United Kingdom4	No	None published23
Statutory prohibition of contingent fees for R&D claims	None found5	Yes	None; Circular 230 for practitioners only

13What none of the four has done

No statute in the four countries that prohibits or caps contingent fees for preparing R&D claims was identified for this paper or for this site's country fee rules pages, which record the review for each country.5 Professional bodies in some countries have their own fee rules, which are covered on this site's country pages and are not law.

This matters for how the federal position should be read. A prohibition on contingent fees in Section 41 engagements would go further than any of the four countries. The record does not show whether their more limited measures have worked, so it cannot settle whether a prohibition is necessary. What it does show is that tax authorities in the United States and the United Kingdom have each said in official documents that a fee tied to the result can create an incentive to increase or overstate claims, and that Canada studied contingency fee practice before requiring disclosure.3248 Each acted on that concern in part.

14The case against borrowing from abroad

There is a fair argument that the foreign record counsels caution. If none of the four countries has prohibited contingent fees, the United States might first try what they tried: disclosure, controls on the flow of money, promoter rules or adviser registration. Each is less restrictive than a prohibition, and each leaves businesses free to choose a fee that costs nothing upfront.

A second argument is that Canada has required fee disclosure for more than a decade without moving to a prohibition, which might suggest that disclosure has been enough.9 That inference cannot be drawn from the official record. No published analysis of the Canadian data was found, and the absence of further legislation may reflect many things other than the success of disclosure. The same is true of the other countries: the record shows what they did, not why they stopped where they did.

A third argument is that the United States should wait for Treasury's 2024 proposal, which would treat contingent fees for returns and pre-examination refund claims as disreputable conduct for practitioners.32 That proposal has not been finalized, and it would not reach preparers who are not practitioners.326

The answer to the first argument is that the measures abroad were designed to fit systems with powers the IRS lacks or with different incentive designs. The UK measures rest on statutory regulation of advisers, which the United States does not have.619 Disclosure and payment controls leave the fee calculated on the credit in place. In the United States, the closest existing rule, Treasury's contingent fee restriction, already reflects the judgment that such fees should not be charged for preparing returns and refund claims, and is limited only by Treasury's authority.336 A statute is the most direct way to apply that judgment to everyone who prepares a research credit claim.

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 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.

15What the record does not show

Whether any of the measures described here changed the size or accuracy of claims prepared on contingent fees. No official evaluation of that kind was found.
What Canada's preparer billing data shows about how SR&ED claims are paid for.
Any comparison of claim outcomes across countries.

Readers should treat this paper as a description of what other countries have done and why they said they did it, not as evidence of what those measures achieved.

References

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 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
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
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
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); Attorney-General's Chambers, Income Tax Act 1947 (Singapore), section 37S (https://sso.agc.gov.sg/Act/ITA1947?ProvIds=pr37S-). The country fee rules pages on this site set out the review for each country (all accessed 11 October 2026). Back
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
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, 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
Internal Revenue Service, Instructions for Form 6765 (Rev. December 2025), read in full. https://www.irs.gov/instructions/i6765 (accessed 11 October 2026). Back
Department of the Treasury, General Explanations of the Administration's Fiscal Year 2025 Revenue Proposals (March 2024), "Expand and increase penalties for noncompliant return preparation and e-filing and authorize IRS oversight of paid preparers", pages 206 to 209. https://home.treasury.gov/system/files/131/General-Explanations-FY2025.pdf (accessed 11 October 2026). Back
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
Office of the Law Revision Counsel, 26 U.S.C. 6695, Other assessable penalties with respect to the preparation of tax returns for other persons, 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
HM Revenue and Customs, Tell HMRC you want to claim Research and Development (R&D) tax relief, sections "Who needs to submit the form", "When to submit the form" and "What information you'll need". https://www.gov.uk/guidance/tell-hmrc-that-youre-planning-to-claim-research-and-development-rd-tax-relief (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". https://www.gov.uk/guidance/submit-detailed-information-before-you-claim-research-and-development-rd-tax-relief (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", section "Statutory framework". https://www.gov.uk/hmrc-internal-manuals/corporate-intangibles-research-and-development-manual/cird182000 (accessed 11 October 2026). Back
Treasury Department and Internal Revenue Service, 26 CFR 1.6109-2, Tax return preparers furnishing identifying numbers for returns or claims for refund and related requirements, paragraphs (a)(1) to (a)(3). https://www.ecfr.gov/current/title-26/section-1.6109-2 (accessed 11 October 2026). Back
Treasury Department and Internal Revenue Service, 26 CFR 301.7701-15, Tax return preparer, paragraphs (b)(1) and (b)(2)(i). https://www.ecfr.gov/current/title-26/section-301.7701-15 (accessed 11 October 2026). Back
HM Revenue and Customs, Check if and when you need to register as a tax adviser with HMRC (last updated 3 September 2026), sections "Changes to registration" and "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
HM Revenue and Customs, Compliance Handbook, CH176100, "Sanctionable conduct by tax advisers: Overview". https://www.gov.uk/hmrc-internal-manuals/compliance-handbook/ch176100 (accessed 11 October 2026). Back
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Government of Canada, Income Tax Act, RSC 1985, c 1 (5th Supp), section 163.2, subsections 163.2(1) (definition of "gross compensation"), (4), (5) and (6). https://laws-lois.justice.gc.ca/eng/acts/I-3.3/section-163.2.html (accessed 11 October 2026). Back
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Cite this paper

Summary

1Summary

2Why look abroad, and the limits of doing so

3Measure 1: disclose the fee on the claim (Canada)

4Measure 2: control where the money goes (United Kingdom and Ireland)

5Measure 3: name every adviser involved (United Kingdom)

6Measure 4: regulate paid advisers by statute (United Kingdom)

7Measure 5: measure the problem (United Kingdom)

8Measure 6: check claims before they are made (several countries)

9Measure 7: penalties on those who assist, linked to their pay (Canada, Ireland and Singapore)

10Singapore: a reviewer, not a preparer

11How the measures fit together

12Figure 1: measures compared

13What none of the four has done

14The case against borrowing from abroad

15What the record does not show

References

About this paper

Cite this paper

Summary

1Summary

2Why look abroad, and the limits of doing so

3Measure 1: disclose the fee on the claim (Canada)

4Measure 2: control where the money goes (United Kingdom and Ireland)

5Measure 3: name every adviser involved (United Kingdom)

6Measure 4: regulate paid advisers by statute (United Kingdom)

7Measure 5: measure the problem (United Kingdom)

8Measure 6: check claims before they are made (several countries)

9Measure 7: penalties on those who assist, linked to their pay (Canada, Ireland and Singapore)

10Singapore: a reviewer, not a preparer

11How the measures fit together

12Figure 1: measures compared

13What none of the four has done

14The case against borrowing from abroad

15What the record does not show

References

About this paper

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