Guide

How to compare proposals

Putting different fee models on the same basis: one claim figure, every fee costed on it and on half of it, extras added, the downside tested, and the non-fee terms compared side by side.

8 minute read

Two proposals for the same claim can look nothing like each other. One quotes a percentage, one a fixed sum, one an hourly rate with an estimate, one a mix. None of those numbers can be compared with another until they are put on the same claim, with the same extras, and tested against the same bad outcome. This guide does that in six steps. It treats every model the same way, because every model can be the right one for a particular business.

Step 1: fix the claim figure

Every comparison starts with the claim you expect. Estimate it honestly, using last year's claim if you have one, or a rough figure from the projects and costs you think qualify. Then write down a second figure, well below the first. The second figure is the one you will be glad you used if the claim turns out smaller than you hoped, and it is where fee models separate most.

This site uses one illustrative example throughout: a claim of $250,000, and a smaller case of $100,000. The figures in this guide use it so that the worked table matches the fee types pages and the calculator. Replace them with your own.

An expected claim figure, written down
A smaller figure, well below the first
The same two figures given to every adviser you ask

Step 2: get every fee in writing on those figures

Ask each adviser for a worked example on both figures. The script for asking how the fee is calculated does this. You want, for each proposal, the fee at the expected claim, the fee at the smaller claim, and the answers to three questions: what the percentage applies to (the amount claimed or the amount received), whether there is a cap or a minimum, and when the fee is due.

Here is what the models in the shared example produce on a $250,000 claim and on a $100,000 claim. Illustrative figures, from the shared example used across this site.

Model	Fee on $250,000	Fee on $100,000	What moves it
Percentage, 20%	$50,000	$20,000	The size of the claim
Fixed fee	$35,000	$35,000	Nothing, unless the scope changes
Capped percentage, 20% to $60,000	$50,000	$20,000	The claim, until the cap at $300,000
Hourly, 120 hours at $250	$30,000	$30,000	The hours actually spent
Hybrid, $17,500 plus 10%	$42,500	$27,500	Half fixed, half the claim
Retainer $17,500, credited against 10%	$25,000	$17,500	Whether the retainer is credited
Deferred, $35,000 plus a 10% uplift	$38,500	$38,500	Paying later costs more
Software-assisted	$6,000 subscription	$6,000 subscription	Not a fee on the claim; what the subscription covers

Illustrative figures. The percentage and the fixed fee cross over at $175,000 on these assumptions: below it the percentage costs less, above it the fixed fee does. The hourly figure is an estimate of time, and a 60 hour overrun would take it to $45,000.

A worked example from every adviser on both figures
The base of every percentage named: claimed or received
Every cap, minimum and payment date noted

Step 3: add the extras

The headline fee may not be the whole price. Go through each proposal for what is charged on top: help with a tax authority review if it is not included, work outside the stated scope at hourly rates, a minimum fee that applies if the claim is small, disbursements, and anything due in a year when you decide not to claim. Add a realistic amount for each to the headline fee, so that a proposal that includes review support is compared with one that does not on a fair footing.

The review and audit support clause page explains what to look for. A proposal that prices support separately is not worse for it, provided you add the price before you compare.

Review support: included, or priced and added
Hourly extras: the rate and a realistic number of hours added
Minimums and retainers: applied to the smaller claim figure
Charges for a year without a claim

Step 4: test the downside

Now put each proposal through two bad outcomes. First, the claim is filed, paid, and later reduced on review: in the shared example, from $250,000 to $200,000. The business repays $50,000, with interest where it applies and sometimes a penalty, whatever the fee model.1 What happens to the fee is the question. A percentage on the amount received falls to $40,000; a percentage on the amount claimed stays at $50,000 unless a refund clause says otherwise; a fixed fee stays at $35,000. Illustrative figures.

Second, the claim fails altogether or is never filed. A contingent fee costs nothing. A fixed fee may still be due, depending on the letter. An hourly fee is due for the hours spent. Neither outcome makes a model good or bad; each shows where its risk sits, and whose.

Each proposal costed with the claim reduced after filing
Each proposal costed with the claim failing
The refund clause and the review support clause read for each

Step 5: compare the terms that are not the fee

Two proposals with the same fee can still be very different deals. Put the non-fee terms side by side: whether you see the full claim before filing, whether the adviser is named on the form where it asks, who owns the working papers and whether they come back without charge, the notice period and whether the letter renews by itself, any exit fee, and the liability cap. The contracts section explains each.

These terms decide what happens when something goes wrong, which is when the fee stops being the thing you care about. A lower fee with records held against payment and a two year notice period is not a cheaper deal.

Full claim before filing: yes or no
Records returned without charge: yes or no
Notice period and renewal: written down
Exit fee and liability cap: written down

Step 6: decide, and say why

With the summaries side by side, you can decide, and the right answer is not always the lowest number. Choose the proposal whose fee you can afford in a good year, whose downside you can carry in a bad one, and whose terms you can live with. Write a short note of why you chose it; if the fee is a percentage, note the cap you asked for and whether you got it. The how to negotiate fees guide covers what to ask for before you sign, and the how to choose an adviser guide covers the steps around this one.

Tell the advisers you did not choose, briefly and politely. You may want to ask them again next year.

One page summary for each proposal
A written note of the decision and the reasons
The others told

Step 7: when the proposals are for different work

Sometimes the proposals cannot be put on the same basis because they are not for the same job. One adviser proposes to prepare the whole claim; another proposes to review a claim your finance team drafts; a third offers a software tool with a technical review bought separately. Comparing their fees directly would be comparing a car with a bicycle.

Put the scope beside the fee instead. For each proposal, write down what the adviser will do, what you will do, and what your own time will cost for your part; the in-house or adviser guide helps with that estimate. Then compare the total of fee plus your time, and compare the risk: a claim your team drafted and an adviser reviewed is a claim your team understands, while a claim prepared entirely by an adviser may be cheaper in your time and dearer in fees. Neither is better in general. If one proposal includes something the others do not, such as help with a review or a worked technical case your engineers will read, price that in rather than ignoring it.

Where scopes differ, ask the advisers whether they would quote for the same scope. Some will, and the comparison becomes simple. Some will not, because the scope they proposed is the one they do well, and that is useful to know too.

Scope written down for each proposal: what the adviser does, what you do
Your own time priced for your part of each
Extras that only some proposals include priced in
Quotes for the same scope requested where possible

Sources

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). More detail on your country page. Back

General information about choosing and managing an adviser. It is not advice on whether your work qualifies for R&D tax relief.

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.