How to negotiate fees

Fee terms are proposed, not fixed. An adviser who wants your work can discuss them, and the terms that matter most to you can cost the adviser little to give. This guide takes the negotiable terms one at a time: what to ask for, why an adviser can fairly agree, what you might offer in return, and how to make sure the answer ends up in the letter rather than in an email. It is written for a business that wants a fair deal, not the lowest number; the lowest number is not always the best deal.

Step 1: know what you want before you ask

Negotiation goes badly when it is a list of complaints and well when it is three clear requests with reasons. Before you write to the adviser, decide which terms matter most to you. For a business expecting a large claim, it may be a cap. For a business unsure whether the claim will succeed, it is a fee on the amount received and a refund clause. For a business that has been through a review, it is review support in the price. For a business that has changed adviser before, it is records and notice.

Work out your position on the shared example if it helps: a 20% fee on a $250,000 claim is $50,000, and on a $1,000,000 claim it is $200,000, while a $35,000 fixed fee is the same at both. Illustrative figures. The fee comparison calculator shows your own numbers.

• The three terms that matter most, in order
• For each, the figure or wording you want
• For each, the reason, in one sentence
• What you can offer in return

Step 2: ask for a cap on a percentage fee

A cap turns an open-ended percentage into a fee with a ceiling. It is the single most useful request for a business whose claim could grow: the work of preparing a claim does not always rise in step with its size, and a cap says so. On the shared example, a 20% fee capped at $60,000 is $50,000 on a $250,000 claim, the same as without the cap, and stays at $60,000 however large the claim becomes; the cap is reached at $300,000. Illustrative figures.

An adviser can fairly agree because the cap costs nothing in an ordinary year and only bites in an exceptional one. Set the cap at a figure you would be content to pay in a good year, and say why: a larger project under way, a growing payroll, a one-off. If the answer is no, the fallbacks are a lower percentage above a threshold, or a cap per project rather than per year. The script for asking for a fee cap puts it in writing.

• The cap figure, chosen from the largest claim you can imagine
• The reason, in the email
• The fallbacks ready: a lower rate above a threshold, or a cap per project

Step 3: ask for the fee to follow the result

A percentage of the amount claimed is fixed when the form is filed. A percentage of the amount received waits for the money and falls if the claim is reduced. Ask for the second. The what counts as the benefit clause is where the letter says which it is, and a one line change does it.

If the adviser prefers to be paid on filing, ask instead for a refund clause: if the claim is reduced after payment, the fee is recalculated on the amount finally agreed and the difference refunded by a date. The fee refund clause page shows a sample. An adviser can fairly agree to either, because a claim they stand behind should not be reduced; what they are agreeing to is to share the consequence if it is. The business repays the difference, with interest and penalties where they apply, whatever the fee does.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). More detail on your country page.

• Fee on the amount received, or a refund clause with a date
• The exceptions in the refund clause written in words you can test
• The answer in the letter, not in an email

Step 4: ask for review support in the price

A tax authority can review a claim years after it is paid, within time limits set by law, and help with that review is the part of the service you will value most if it happens.2Source 2A tax authority can review a claim after it has been paid, within time limits set by law: Internal Revenue Code section 6501 (United States); Finance Act 1998 Schedule 18 paragraphs 24 and 46, via HMRC Enquiry Manual EM1510 and Compliance Handbook CH51300 (United Kingdom); Taxes Consolidation Act 1997 section 959AA, via Revenue Notes for Guidance Part 41A (Ireland); Income Tax Act section 152(3.1) and (4) (Canada); Income Tax Assessment Act 1936 section 170, Income Tax Assessment Act 1997 section 355-705 and the ATO, Request an amendment to a business or super tax return (Australia); Tax Administration Act 1994 section 108, via Inland Revenue SPS 20/03 (New Zealand); Income Tax Act 1947 section 74 (Singapore). More detail on your country page. Ask for it to be included: correspondence, meetings, revised calculations, and work on new information from the tax authority, for as long as a review can arrive, whether or not the engagement has ended. The review and audit support clause page shows what that looks like.

If the adviser prices support separately, that can be a fair term, provided the price is a rate with an estimate and a budget you control, not an open-ended hourly charge. What you can offer in return is a fee basis that pays the adviser promptly for the claim itself; what you are asking for is confidence that they will stand behind it.

• Review support included, with the scope written down
• Or: a rate, an estimate and a budget that cannot be exceeded without your agreement
• Support that survives the end of the engagement

Step 5: consider a fixed element or staged payments

A fee that is partly fixed and partly a percentage can suit both sides: the adviser is paid something for the work whatever the outcome, and the business gives up some of the upside in exchange for a lower rate. On the shared example, a hybrid of $17,500 plus 10% is $42,500 on a $250,000 claim, against $50,000 for 20% alone, and $27,500 on a $100,000 claim, against $20,000. Illustrative figures. Which is better depends on your claim size and how sure you are of it; the hybrid fees page sets out the trade.

Staged payments spread a fixed fee across the work: a part on signing, a part on filing, a part when the benefit arrives. They help cash flow and tie the last payment to the result. Ask that the final stage is due on receipt, not on filing, and that a claim withdrawn before filing is charged only for work done. A retainer is a staged payment in another name; ask whether it is credited against the final fee.

• A fixed element offered in exchange for a lower rate, if it suits you
• Staged payments with the last stage on receipt of the benefit
• Retainers credited against the final fee

Step 6: fix the terms that cost nothing to fix

Some terms are easy to agree because they cost the adviser nothing in an ordinary engagement, and they are the terms that matter most if things go wrong. Ask for records and working papers returned on request without charge. Ask for a notice period of three months or less, and a reminder before any renewal date. Ask for the full claim, including the technical descriptions, before filing, with your written approval as a condition of filing. Ask for no exit fee beyond work actually done. The clause pages on termination, ownership of records and renewal show the wording.

• Records returned without charge, with a date
• Notice period of three months or less; reminder before renewal
• Full claim before filing; written approval before filing
• No exit fee beyond work done

Step 7: get it into the letter

A concession agreed by email and not written into the letter is a concession you will have to argue for later. Ask the adviser to send a revised engagement letter, or a signed addendum, with each agreed term in it. Read the revised letter against your list. Where a term has been written in words that could be read two ways, ask for the plainer version. Then ask a lawyer in your country to review the letter before you sign; contract law differs by country and this guide cannot tell you what a clause will do in yours.

• Every agreed term in the revised letter or a signed addendum
• Each read against your list, in plain words
• A lawyer has reviewed the final letter

Read next

• How to compare proposals and the true cost of a claim
• The scripts: asking for a fee cap and asking how the fee is calculated
• Case study: the manufacturer who negotiated a cap

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). More detail on your country page.  Back
2. A tax authority can review a claim after it has been paid, within time limits set by law: Internal Revenue Code section 6501 (United States); Finance Act 1998 Schedule 18 paragraphs 24 and 46, via HMRC Enquiry Manual EM1510 and Compliance Handbook CH51300 (United Kingdom); Taxes Consolidation Act 1997 section 959AA, via Revenue Notes for Guidance Part 41A (Ireland); Income Tax Act section 152(3.1) and (4) (Canada); Income Tax Assessment Act 1936 section 170, Income Tax Assessment Act 1997 section 355-705 and the ATO, Request an amendment to a business or super tax return (Australia); Tax Administration Act 1994 section 108, via Inland Revenue SPS 20/03 (New Zealand); Income Tax Act 1947 section 74 (Singapore). More detail on your country page.  Back