Is the fee based on the benefit claimed or received?

The claim is made in your name. If the tax authority reduces it after filing, you repay the difference, usually with interest and sometimes a penalty.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. Whether the adviser's fee comes down too depends on one word in the letter. A fee on the amount claimed stays where it was. A fee on the amount received falls with the refund.

On the shared example, a 20% fee on a $250,000 claim is $50,000. If the claim is reduced to $200,000 on review, a fee on the amount received becomes $40,000, while a fee on the amount claimed stays at $50,000. Illustrative figures.

The adviser health check asks you: "Is your fee worked out on the credit you actually receive, not the credit claimed?"

A clear statement of which it is, and why. There are fair reasons for either. A fee on the amount claimed pays the adviser for work done regardless of a later review; a fee on the amount received shares the risk of that review with you. What matters is that you know which one you are signing, and that the letter says what happens if the claim is reduced.

A letter that uses "the benefit" or "the credit" without saying claimed or received. A fee due on filing with no adjustment clause. An answer that the question has never come up.

• The clause: what counts as the benefit and fee refund if the claim is reduced
• The script: asking how the fee is calculated
• Red flag: unclear fee base. Green flag: a fee you can work out yourself
• Adviser health check

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