Take the fee test
Clause

Liability and indemnity

The clause that limits what you can recover from the adviser if something goes wrong, and what you promise to cover for them. Read it with the review and refund clauses: together they say who carries the risk.

This page explains a common clause in general terms. It is not legal advice, and contract law differs between countries. Ask a lawyer to review your own engagement letter.

Sample clause

Written for this guide, not from any real contract

1 Our total liability to the Client for any loss arising from the Services is limited to the Fee paid for the Claim concerned. 2 We are not liable for any tax, interest or penalty assessed on the Client, 3 nor for any loss caused by information the Client gave us that was incomplete or inaccurate. 4 The Client will indemnify us against any claim by a third party arising from the Client's use of the Services. 5 Nothing in this clause limits any liability that the law does not allow to be limited.

  1. The cap. Here it is the fee for that claim. A cap far below the fee, or at a token sum, is worth asking about.
  2. Tax, interest and penalties are outside the cap altogether. This reflects who the tax authority assesses.
  3. Your information. Fair as far as it goes; ask how "incomplete" would be judged when the adviser chose what to ask for.
  4. What you promise to cover for the adviser. Ask what a third party claim from your use of the services would be.
  5. What the law reserves. Which liabilities cannot be limited differs by country. Ask a lawyer.

What it means in plain English

If a claim is reduced, the repayment, the interest where it applies and any penalty usually fall on the business whose name is on the claim.1Source 1The business repays a reduced claim, with interest and penalties where they apply: IRS, "Interest" and "Accuracy-related penalty" (United States); HMRC, "Tell HMRC if you've claimed too much R&D tax relief" (United Kingdom); Revenue, Tax and Duty Manual Part 29-02-06, "R&D tax credit: clawback of relief" (Ireland); Income Tax Act section 161(1) and CRA, "Avoiding penalties" (Canada); Department of Industry, Science and Resources, "Decisions we make about R&D Tax Incentive applications" (Australia); Inland Revenue, "Interest on overpayments and underpayments" and "Shortfall penalties" (New Zealand); IRAS, "Penalties for errors in tax returns" (Singapore). Rules under which a preparer or agent can be penalised alongside the business: IRS, "Tax preparer penalties" (United States); HMRC, Compliance Handbook CH81166 (United Kingdom); Revenue, Notes for Guidance, TCA 1997 Part 47, section 1055 (Ireland); Income Tax Act section 162(5.1) to (5.3) and CRA, IC01-1R2 "Third-party civil penalties" (Canada); Tax Agent Services Act 2009, sections 30-10 and 30-15 (Australia); Inland Revenue, "Shortfall penalties" (New Zealand); Income Tax Act 1947 section 95 (Singapore). More detail on your country page. This clause says how much of any loss you could recover from the adviser, and what you promise to cover for them. In the sample, the adviser's liability is capped at the fee for the claim concerned, excludes tax, interest and penalties altogether, excludes losses caused by information you gave that was wrong or incomplete, and is matched by your promise to cover the adviser against claims by third parties. The last sentence leaves alone whatever the law of your country does not allow a contract to limit.

Read this clause with the review clause and the refund clause. Together they say what you get if the claim goes wrong: help, a refund of some fee, or neither.

What to look for

A version that is easy to live with sets a cap you can see, says what is inside and outside it in plain words, leaves a route to the fee refund clause rather than cutting across it, keeps the indemnity you give narrow and specific, and tells you to take advice. A cap at the fee is one choice an adviser can fairly make; what matters is that you understood it when you compared the price.

A version to ask more about excludes "any loss whatsoever", caps liability at a figure far below the fee, asks you to indemnify the adviser against the adviser's own errors, or has an indemnity that runs one way only. Whether a limitation is effective is a question for a lawyer in your country, not for this page: a clause being in the letter does not tell you whether it would hold, and this page does not say.

Contract law differs by country, and so does what a letter can and cannot do. Ask a lawyer to review your own letter before you sign it.

Questions to ask

Sources

  1. The business repays a reduced claim, with interest and penalties where they apply: IRS, "Interest" and "Accuracy-related penalty" (United States); HMRC, "Tell HMRC if you've claimed too much R&D tax relief" (United Kingdom); Revenue, Tax and Duty Manual Part 29-02-06, "R&D tax credit: clawback of relief" (Ireland); Income Tax Act section 161(1) and CRA, "Avoiding penalties" (Canada); Department of Industry, Science and Resources, "Decisions we make about R&D Tax Incentive applications" (Australia); Inland Revenue, "Interest on overpayments and underpayments" and "Shortfall penalties" (New Zealand); IRAS, "Penalties for errors in tax returns" (Singapore). Rules under which a preparer or agent can be penalised alongside the business: IRS, "Tax preparer penalties" (United States); HMRC, Compliance Handbook CH81166 (United Kingdom); Revenue, Notes for Guidance, TCA 1997 Part 47, section 1055 (Ireland); Income Tax Act section 162(5.1) to (5.3) and CRA, IC01-1R2 "Third-party civil penalties" (Canada); Tax Agent Services Act 2009, sections 30-10 and 30-15 (Australia); Inland Revenue, "Shortfall penalties" (New Zealand); Income Tax Act 1947 section 95 (Singapore). More detail on your country page.  Back

KnowYourFees.org is published by Swanson Reed, an R&D tax advisory firm that competes with other advisers. This site does not recommend any adviser, including Swanson Reed.

© 2026 Swanson Reed. You may use the templates and checklists for your own business. Official material is used under the terms set by its publisher.