Who pays for an overclaim

1Summary

A research credit claim can be wrong in good faith. The law of the federal credit under Section 41 calls for judgments about business components, experimentation and qualified expenses, and reasonable people can reach different answers.1 When the IRS reduces a claim, the law decides who bears the cost.

This paper sets out that allocation. Under federal law the taxpayer repays any credit or refund it was not entitled to, with interest at the underpayment rate, and may owe a penalty of 20 percent of the excessive amount of a refund claim or of the underpayment on a return.2345 A tax return preparer is penalized only if statutory conditions are met, and the penalty is measured partly by the preparer's income from the return or claim.6 Reliance on professional advice can relieve the taxpayer of some penalties, but not of the tax or the interest.78

The paper then compares the United Kingdom, Canada and Ireland. Each also places repayment and the main penalties on the claimant, and each has separate penalties for advisers that depend on the adviser's knowledge or intent.91011121314

The allocation matters for how advisers are paid. Under a fee calculated as a share of the credit, the adviser's income rises with the amount claimed, while the cost of an amount that does not survive falls mainly on the taxpayer. The paper sets out the case for the present allocation before answering it. Swanson Reed's position is stated once, in a labeled box.

2What an overclaim is

In this paper an overclaim is a claim for more credit than the law allows. It may be made on an original return or on an amended return or other claim for refund. A claim for refund must generally be filed within three years from the time the return was filed or two years from the time the tax was paid, whichever is later.15 The claim must set forth in detail each ground on which it is made and facts sufficient to apprise the IRS of its exact basis.16 The IRS must generally assess additional tax within three years after the return was filed.17

Federal law uses two measures of an overclaim, depending on how it arises.

An underpayment on a return. Where the credit is claimed on a return and reduces the tax shown, a reduction of the credit produces an underpayment of tax.5
An excessive amount in a refund claim. Where the credit is claimed in a claim for refund or credit, the "excessive amount" is the amount by which the claim exceeds the amount allowable for the year.4

An overclaim does not require bad faith. The research credit depends on judgments made for each business component, including whether substantially all of the activities, which the regulations set at 80 percent, were elements of a process of experimentation.118 The IRS Office of Chief Counsel has described the credit as a complex area of law involving a four-part test and numerous exclusions.19

3What the taxpayer pays

3.1The credit itself

The first cost is the credit. If the credit reduced the tax shown on a return, the reduction becomes an underpayment that the IRS may assess.517 If the credit was refunded, any portion of tax erroneously refunded may be recovered by a civil action brought in the name of the United States.3 In either case the taxpayer returns what it received. No federal provision identified for this paper places that repayment on the person who prepared the claim.

3.2Interest

Interest runs on unpaid tax from the last date prescribed for payment, at the underpayment rate.2 An amount erroneously refunded and recoverable by suit bears interest at the underpayment rate from the date of the refund.3 The underpayment rate is the federal short-term rate plus 3 percentage points, and for a large corporate underpayment, meaning an underpayment by a C corporation of more than $100,000 for a period, it is the federal short-term rate plus 5 percentage points after an applicable date.20

Interest compensates the government for the time value of money. It is not a penalty, and no reasonable cause defense removes it.2

3.3Penalties

Two penalties can apply to the taxpayer, and the statute coordinates them so that the same amount is not penalized twice.

Penalty	Applies to	Amount	Defense
Accuracy-related penalty, Section 6662	The portion of an underpayment due to negligence or disregard of rules, or a substantial understatement of income tax5	20 percent of that portion5	Reasonable cause and good faith, Section 6664(c)7
Erroneous claim penalty, Section 6676	The excessive amount of a claim for refund or credit of income tax4	20 percent of the excessive amount4	Reasonable cause4

For a corporation other than an S corporation or personal holding company, an understatement is substantial if it exceeds the lesser of 10 percent of the tax required to be shown (or, if greater, $10,000) and $10,000,000.5 The erroneous claim penalty does not apply to any portion of an excessive amount that is subject to the accuracy-related penalty.4

Both penalties fall on the taxpayer. The erroneous claim penalty is imposed on "the person making such claim", which is the taxpayer.4

3.4Reliance on an adviser

A taxpayer that relied on an adviser may be able to avoid a penalty, but not the tax or the interest. No accuracy-related penalty applies to a portion of an underpayment where the taxpayer shows reasonable cause and good faith.7 The regulations state that reliance on the advice of a professional tax advisor "does not necessarily demonstrate reasonable cause and good faith", but constitutes reasonable cause and good faith "if, under all the circumstances, such reliance was reasonable and the taxpayer acted in good faith".8

The regulations set minimum requirements. The advice must be based on all pertinent facts and circumstances and the law as it relates to them, and the requirements are not met if the taxpayer fails to disclose a fact it knows, or reasonably should know, to be relevant. The advice must not be based on unreasonable factual or legal assumptions.8 Reliance may not be reasonable if the taxpayer knew, or reasonably should have known, that the advisor lacked knowledge in the relevant aspects of federal tax law.8

The defense is therefore conditional, and its effect is limited. Where it succeeds, it removes a penalty. It does not move the tax or the interest to the adviser.27

3.5Costs the statute does not count

A reduced claim also produces costs that no statute assigns: the time of the taxpayer's staff in an examination, the fees of any representative, and the disruption of a dispute. Whether an adviser bears any of these depends on the engagement letter. No federal rule requires an adviser to provide audit support, to refund a fee when a claim is reduced, or to indemnify the taxpayer.

4What the preparer pays

4.1The preparer penalty

A tax return preparer who prepares a return or claim for refund in which any part of an understatement of liability is due to an unreasonable position, and who knew or reasonably should have known of the position, owes a penalty of the greater of $1,000 or 50 percent of the income derived, or to be derived, by the preparer with respect to the return or claim.6 A position is unreasonable unless there is or was substantial authority for it, or, for a position adequately disclosed, unless there is a reasonable basis for it.6 No penalty applies if there was reasonable cause for the understatement and the preparer acted in good faith.6

Where the understatement is due to a willful attempt to understate the liability, or to reckless or intentional disregard of rules or regulations, the penalty is the greater of $5,000 or 75 percent of the income derived.6 An "understatement of liability" includes "any overstatement of the net amount creditable or refundable".6 The penalty is abated, and any amount paid refunded, if a final administrative determination or judicial decision finds there was no understatement.6

Two features matter here. The penalty depends on the preparer's position falling below a legal standard, not on the claim being reduced. And it is measured partly by the preparer's income from the return or claim, which for a contingent fee is the fee itself.6

4.2Other penalties and sanctions

Other rules can apply to a person who prepares or advises on a claim.

Aiding and abetting. A person who aids or advises on a portion of a return or claim, knowing it will be used in a material tax matter and knowing it would result in an understatement of another person's tax, owes $1,000 per document, or $10,000 if the document relates to a corporation's tax.21
Injunctions. A court may enjoin a preparer who has engaged in conduct subject to the preparer penalties, or who has guaranteed the payment of any tax refund or the allowance of any tax credit, among other grounds.22
Circular 230. Treasury may censure, suspend or disbar a practitioner, and may impose a monetary penalty that does not exceed the gross income derived, or to be derived, from the conduct giving rise to the penalty.23

Each of these turns on knowledge, intent or misconduct by the preparer. None requires the preparer to repay the taxpayer's credit or the interest on it.6212223

4.3The fee

No federal rule requires an adviser to refund a fee when a claim is reduced. Whether a fee is refunded depends on the engagement letter. Treasury's definition of a contingent fee includes "any fee arrangement in which the practitioner will reimburse the client for all or a portion of the client's fee in the event that a position taken on a tax return or other filing is challenged by the Internal Revenue Service or is not sustained".24 A promise to refund the fee if the claim fails is therefore itself a contingent fee under Circular 230, which restricts contingent fees for preparing returns and refund claims, subject to the limits discussed in other papers in this series.24

5An illustration

The following example is illustrative only. It uses round numbers and assumes that a refund claim is reduced and that the statutory conditions for each item are met where stated.

A business files a refund claim for a research credit of $500,000, prepared for a fee of 20 percent of the credit claimed, or $100,000. On examination, $200,000 of the credit is disallowed.

Item	Who bears it	Illustrative amount
Credit refunded but not allowed	Taxpayer	$200,000
Interest from the date of refund	Taxpayer	At the underpayment rate320
Erroneous claim penalty, unless reasonable cause	Taxpayer	20 percent of $200,000, or $40,0004
Cost of responding to the examination	Taxpayer, unless the contract provides otherwise	Not set by statute
Fee calculated on the claim as filed	Paid by the taxpayer to the adviser	$100,000, of which $40,000 relates to the disallowed amount
Preparer penalty, only if the position lacked substantial authority and the preparer knew or should have known	Preparer	Greater of $1,000 or 50 percent of income derived from the claim6

The illustration shows the structure, not a typical case. Not every claim is reduced, and not every reduction carries a penalty for either party. What the structure shows is that the costs tied to the disallowed amount fall on the taxpayer in every case, while the adviser's exposure depends on a further finding about the adviser's position.

6How other countries allocate the cost

The same basic pattern appears in the three other countries this site covers in most detail. This section describes their rules factually.

6.1United Kingdom

HMRC may charge a company a penalty for an inaccuracy in a return or document that results in tax being understated or over-claimed, where the inaccuracy was careless, deliberate, or deliberate and concealed. The penalty is a percentage of the potential lost revenue, ranging up to 30 percent for careless inaccuracies and up to 100 percent for deliberate and concealed ones.9 HMRC states that a person who asks an adviser to act for it must do everything it reasonably can to prevent inaccuracies, and may be penalized if it does not.9

HMRC has said that "Even if a customer uses a tax agent, they remain responsible for their own tax affairs", and that it recovers amounts claimed in error.25 Its published R&D compliance report gives an illustrative case study in which a small restaurant business is persuaded by an agent to claim, the agent takes £1,600 in fees from relief of £4,000, and a year later the business must pay back the £4,000 plus interest.25 The same report records that some agents who advised on or submitted a claim "are unwilling to engage with a subsequent compliance check".25

The United Kingdom has separate penalties for advisers. Since 1 April 2026, HMRC can charge penalties on tax advisers for "sanctionable conduct", meaning conduct in the course of assisting clients "with the intention of bringing about a loss of tax revenue". The first penalty can be up to 70 percent of the potential lost revenue, capped at £1 million, with a minimum of £7,500.1026 HMRC also changed how relief is paid. From April 2024, R&D agents can no longer receive clients' R&D tax credit payments through the nominations process, subject to limited exceptions, which HMRC said would help reduce "the financial incentive for agents to overstate claims".25

6.2Canada

The CRA states that SR&ED claimants are legally responsible for the accuracy of the information in their claims, and that a claimant who uses a representative is still legally responsible for its claim.2728 A person who makes a false statement knowingly or under circumstances amounting to gross negligence owes a penalty of the greater of $100 and 50 percent of the amounts listed in the Income Tax Act, which include an overstated refundable investment tax credit.11

Canada's adviser penalty, in section 163.2 of the Income Tax Act, applies to a person who makes or participates in a false statement to another person that the person knows, or would reasonably be expected to know but for circumstances amounting to culpable conduct, could be used for a purpose of the Act. It is measured partly by the adviser's "gross compensation", which includes amounts to which the person is entitled "either absolutely or contingently".12 Since 2014 the SR&ED claim form must disclose each paid claim preparer and the billing arrangement, with a $1,000 penalty for missing or inaccurate information for which the claimant and the preparer are jointly liable.29

6.3Ireland

If an Irish R&D corporation tax credit claim is found not to be authorized, the company may be charged to tax on four times the unauthorized amount, with interest from the date the credit was paid or offset.13 Revenue's Code of Practice sets tax-geared penalties for careless and deliberate defaults, ranging up to 100 percent for deliberate behavior, and states that "The taxpayer cannot devolve the responsibility of making a correct return to an agent."30 A separate penalty of €4,000 applies to any person who deliberately assists in or induces the making of an incorrect corporation tax return.14

6.4The pattern

Country	Who repays the relief	Main claimant penalty	Adviser penalty depends on
United States	Taxpayer, with interest23	20 percent (Sections 6662 and 6676)45	Unreasonable position known or that should have been known; willful or reckless conduct6
United Kingdom	Company, with interest25	Up to 100 percent of potential lost revenue, by behavior9	Intention to bring about a loss of tax revenue10
Canada	Claimant28	Greater of $100 and 50 percent, for knowledge or gross negligence11	Knowledge or culpable conduct12
Ireland	Company, charged on four times the unauthorized amount, with interest13	Up to 100 percent, by behavior30	Deliberate assistance14

7The case for the present allocation

The present allocation has a coherent rationale, and it should be stated in its strongest form.

The taxpayer receives the benefit. The credit belongs to the taxpayer, so the taxpayer should return what it was not entitled to. An adviser never received the credit and cannot be asked to repay it.

Responsibility should follow the signature. The taxpayer signs the return or claim and controls the facts. Making the preparer liable for the tax would weaken the taxpayer's own duty of care.

Advisers are already exposed. Preparers face penalties, injunctions and professional sanctions, and the preparer penalty is measured by the preparer's own income from the claim, so it already scales with the fee.62223 In the United Kingdom, Canada and Ireland, adviser penalties also exist.101214

Contracts can fill the gap. A taxpayer can negotiate audit support, a fee holdback, or other terms, and a taxpayer who relied reasonably on advice may avoid penalties.8

Penalties require fault. Imposing liability on advisers without fault would discourage advisers from taking on legitimate claims and reduce access to the credit.

These are serious arguments. Nothing in this paper suggests that advisers who charge contingent fees act improperly, or that any particular adviser has failed to support a claim.

8Answering the case

8.1The benefit and the fee

It is right that the taxpayer repays a credit it was not entitled to. The question is not who repays the credit but what the adviser was paid for. Under a contingent fee, the adviser's income was calculated on the credit as claimed, including the part that did not survive. In the illustration above, $40,000 of the fee related to the amount disallowed. The taxpayer repays that amount to the government with interest; the fee calculated on it is repaid only if the contract says so.

8.2Adviser exposure

The preparer penalty applies only where the position fell below a statutory standard and the preparer knew or should have known of it.6 A reasonable but unsuccessful position carries no preparer penalty, yet it can still cost the taxpayer the tax, the interest and the cost of the examination.26 Most of the exposure created by a larger claim therefore sits with the taxpayer, while the reward for a larger claim sits with the adviser under a contingent fee. The penalty's link to income derived addresses misconduct after the fact; it does not change how the fee is calculated.

8.3Contracts and reliance

Contracts can allocate some costs, but they cannot move the tax or the interest, and a promise to refund the fee if a position is not sustained is itself a contingent fee under Treasury's definition.24 Reliance on advice may remove a penalty, but only where the taxpayer disclosed all relevant facts and the advice met the regulations' requirements, and it never removes the tax or the interest.8

8.4Other countries

The comparison does not show that other countries treat contingent fees as acceptable or unacceptable. It shows that they too leave repayment with the claimant. Two have responded to concerns about agents in other ways: the United Kingdom by ending the payment of R&D credits to agents through nominations, citing the financial incentive to overstate claims, and Canada by requiring disclosure of billing arrangements on every claim.2529 Those are their choices for their own systems, and this paper makes no recommendation for them.

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 and does not show

The record shows:

Federal law places the repayment of a disallowed credit, interest at the underpayment rate, and the 20 percent claimant penalties on the taxpayer.2345
The preparer penalty depends on the preparer's position falling below a statutory standard, and is measured partly by the preparer's income from the claim.6
Reasonable reliance on advice can remove penalties but not tax or interest.78
The United Kingdom, Canada and Ireland also leave repayment with the claimant and impose adviser penalties based on knowledge or intent.911121314
In a random enquiry programme for SME claims, HMRC found non-compliance by value of 28 percent in claims made with a specialist R&D agent and 21 percent in claims made without one, and described it as "slightly higher" where an agent was used.25 That finding concerns the United Kingdom and the use of agents generally, not how agents were paid.

The record does not show:

how often federal research credit claims are reduced, or by how much, by type of preparer or fee arrangement;
how often preparer penalties are assessed on research credit claims;
how often contingent fees are refunded when claims are reduced.

No federal form records how a claim's preparer was paid, so these questions cannot be answered from official data.

References

Office of the Law Revision Counsel, 26 U.S.C. 41, Credit for increasing research activities, subsections (d)(1) and (d)(2), United States Code 2024 edition published by the Government Publishing Office. https://www.govinfo.gov/content/pkg/USCODE-2024-title26/html/USCODE-2024-title26-subtitleA-chap1-subchapA-partIV-subpartD-sec41.htm (accessed 11 October 2026). Back
Office of the Law Revision Counsel, 26 U.S.C. 6601, Interest on underpayment, nonpayment, or extensions of time for payment, of tax, subsection (a), 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-chap67-subchapA-sec6601.htm (accessed 11 October 2026). Back
Office of the Law Revision Counsel, 26 U.S.C. 7405, Action for recovery of erroneous refunds, subsections (a) and (b), and 26 U.S.C. 6602, Interest on erroneous refund recoverable by suit, 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-chap76-subchapA-sec7405.htm and https://www.govinfo.gov/content/pkg/USCODE-2024-title26/html/USCODE-2024-title26-subtitleF-chap67-subchapA-sec6602.htm (accessed 11 October 2026). Back
Office of the Law Revision Counsel, 26 U.S.C. 6676, Erroneous claim for refund or credit, subsections (a), (b) and (d), 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-sec6676.htm (accessed 11 October 2026). Back
Office of the Law Revision Counsel, 26 U.S.C. 6662, Imposition of accuracy-related penalty on underpayments, subsections (a), (b)(1) and (2) and (d)(1), 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-subchapA-partII-sec6662.htm (accessed 11 October 2026). Back
Office of the Law Revision Counsel, 26 U.S.C. 6694, Understatement of taxpayer's liability by tax return preparer, subsections (a), (b), (d) and (e), 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-sec6694.htm (accessed 11 October 2026). Back
Office of the Law Revision Counsel, 26 U.S.C. 6664, Definitions and special rules, subsection (c)(1), 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-subchapA-partII-sec6664.htm (accessed 11 October 2026). Back
Treasury Department, 26 CFR 1.6664-4, Reasonable cause and good faith exception to section 6662 penalties, paragraphs (a), (b)(1) and (c)(1). https://www.ecfr.gov/current/title-26/section-1.6664-4 (accessed 11 October 2026). Back
HM Revenue and Customs, Penalties for inaccuracies in returns and documents: CC/FS7a (updated 21 July 2026), sections on when a penalty may be charged, asking someone else to act, and how the penalty is worked out. https://www.gov.uk/government/publications/compliance-checks-penalties-for-inaccuracies-in-returns-or-documents-ccfs7a/compliance-checks-for-penalties-of-inaccuracies-in-returns-or-documents-ccfs7a-factsheet (accessed 11 October 2026). Back
HM Revenue and Customs, Compliance Handbook, CH176100, "Sanctionable conduct by tax advisers: Overview" (manual updated 7 October 2026). https://www.gov.uk/hmrc-internal-manuals/compliance-handbook/ch176100 (accessed 11 October 2026). Back
Government of Canada, Income Tax Act, RSC 1985, c 1 (5th Supp), subsection 163(2), including paragraph (d). https://laws-lois.justice.gc.ca/eng/acts/I-3.3/section-163.html (accessed 11 October 2026). Back
Government of Canada, Income Tax Act, RSC 1985, c 1 (5th Supp), section 163.2, subsections (1), (4) and (5). https://laws-lois.justice.gc.ca/eng/acts/I-3.3/section-163.2.html (accessed 11 October 2026). Back
Revenue Commissioners, Notes for Guidance, Taxes Consolidation Act 1997, Finance Act 2025 edition, Part 29, section 766C, subsection (10). https://www.revenue.ie/en/tax-professionals/documents/notes-for-guidance/tca/part29.pdf (accessed 11 October 2026). Back
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
Office of the Law Revision Counsel, 26 U.S.C. 6511, Limitations on credit or refund, subsection (a), 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-chap66-subchapB-sec6511.htm (accessed 11 October 2026). Back
Treasury Department, 26 CFR 301.6402-2, Claims for credit or refund, paragraph (b)(1). https://www.ecfr.gov/current/title-26/section-301.6402-2 (accessed 11 October 2026). Back
Office of the Law Revision Counsel, 26 U.S.C. 6501, Limitations on assessment and collection, subsection (a), 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-chap66-subchapA-sec6501.htm (accessed 11 October 2026). Back
Treasury Department, 26 CFR 1.41-4, Qualified research for expenditures paid or incurred in taxable years ending on or after December 31, 2003, paragraph (a)(6). https://www.ecfr.gov/current/title-26/section-1.41-4 (accessed 11 October 2026). Back
IRS Office of Chief Counsel, Memorandum 20214101F, I.R.C. 41 Research Credit Refund Claims, dated 17 September 2021, Law and Analysis part C. https://www.irs.gov/pub/irs-lafa/20214101f.pdf (accessed 11 October 2026). Back
Office of the Law Revision Counsel, 26 U.S.C. 6621, Determination of rate of interest, subsections (a)(2) and (c), 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-chap67-subchapC-sec6621.htm (accessed 11 October 2026). Back
Office of the Law Revision Counsel, 26 U.S.C. 6701, Penalties for aiding and abetting understatement of tax liability, subsections (a) and (b), 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-sec6701.htm (accessed 11 October 2026). Back
Office of the Law Revision Counsel, 26 U.S.C. 7407, Action to enjoin tax return preparers, subsection (b), 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-chap76-subchapA-sec7407.htm (accessed 11 October 2026). Back
Treasury Department, Circular No. 230, 31 CFR 10.50, Sanctions, paragraphs (a) and (c). https://www.ecfr.gov/current/title-31/subtitle-A/part-10/subpart-C/section-10.50 (accessed 11 October 2026). Back
Treasury Department, Circular No. 230, 31 CFR 10.27, Fees, paragraphs (b) and (c)(1). https://www.ecfr.gov/current/title-31/subtitle-A/part-10/subpart-B/section-10.27 (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, 2.2 (illustrative case study), 2.4 and 2.5, and Annex B, Theme 5 and Tables B.4 and B.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
HM Revenue and Customs, Compliance Handbook, CH176140, "Sanctionable conduct by tax advisers: Commencement date" (manual updated 7 October 2026). https://www.gov.uk/hmrc-internal-manuals/compliance-handbook/ch176140 (accessed 11 October 2026). Back
Canada Revenue Agency, Advisory for businesses claiming SR&ED investment tax credits (tax tip, 12 October 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, The SR&ED Review Process: A Guide for Claimants, Appendix A, "Right to be represented" and "What are your responsibilities". https://www.canada.ca/en/revenue-agency/services/scientific-research-experimental-development-tax-incentive-program/technical-review-a-guide-claimants.html (accessed 11 October 2026). Back
Government of Canada, Income Tax Act, RSC 1985, c 1 (5th Supp), subsections 162(5.1) and (5.3); and Canada Revenue Agency, Form T661 T661 E (26), Part 9. https://laws-lois.justice.gc.ca/eng/acts/I-3.3/section-162.html and https://www.canada.ca/content/dam/cra-arc/formspubs/pbg/t661/t661-26e.pdf (accessed 11 October 2026). Back
Revenue Commissioners, Code of Practice for Revenue Compliance Interventions (effective 1 May 2022), sections 2.13 and 4.6.2. https://www.revenue.ie/en/tax-professionals/documents/code-of-practice-revenue-compliance-interventions.pdf (accessed 11 October 2026). Back

Cite this paper

Summary

1Summary

2What an overclaim is

3What the taxpayer pays

3.1The credit itself

3.2Interest

3.3Penalties

3.4Reliance on an adviser

3.5Costs the statute does not count

4What the preparer pays

4.1The preparer penalty

4.2Other penalties and sanctions

4.3The fee

5An illustration

6How other countries allocate the cost

6.1United Kingdom

6.2Canada

6.3Ireland

6.4The pattern

7The case for the present allocation

8Answering the case

8.1The benefit and the fee

8.2Adviser exposure

8.3Contracts and reliance

8.4Other countries

9What the record shows and does not show

References

About this paper

Cite this paper

Summary

1Summary

2What an overclaim is

3What the taxpayer pays

3.1The credit itself

3.2Interest

3.3Penalties

3.4Reliance on an adviser

3.5Costs the statute does not count

4What the preparer pays

4.1The preparer penalty

4.2Other penalties and sanctions

4.3The fee

5An illustration

6How other countries allocate the cost

6.1United Kingdom

6.2Canada

6.3Ireland

6.4The pattern

7The case for the present allocation

8Answering the case

8.1The benefit and the fee

8.2Adviser exposure

8.3Contracts and reliance

8.4Other countries

9What the record shows and does not show

References

About this paper

Related papers