How R&D advisor fee structures work, and the questions to ask before you sign

Advisory fees for R&D claims vary enormously, and claimants are rarely shown how the structures compare. That matters because the fee model shapes the advice. An advisor paid a percentage of the credit has an incentive to make the claim larger; an advisor paid by the hour has an incentive to make it slower; an advisor paid a fixed fee has an incentive to make it quick. None of these is wrong in itself. The point is to know which incentive you are buying.

The main models

Contingent (percentage of benefit)

The advisor takes a share of the credit or relief obtained. Attractive because there is nothing to pay if the claim fails, and cash flow is preserved. The risks are that the percentage can be large relative to the work involved, that the incentive is to maximise rather than to get it right, and that the advisor may or may not stand behind the claim if it is later reduced under review. Ask what happens to the fee if the claim is reduced or repaid, and whether the percentage steps down for larger claims.

Fixed fee

A price agreed up front for a defined scope. Predictable, and the incentive is to do the work efficiently. The risk is scope: make sure the fee covers support during a review, not just filing the claim.

Hourly or time-based

Common with accounting firms and for complex or first-year claims. Transparent if the estimate is realistic and updated. Ask for a cap or an estimate with a notification threshold.

Hybrid

A reduced fixed fee plus a smaller contingent element, or a fixed fee for preparation and hourly for review support. Often a reasonable balance, provided the components are written down.

What drives the cost

Whatever the model, the work is the same: identifying projects, interviewing technical staff, drafting narratives, gathering cost data, calculating, filing, and supporting any review. Fees should reflect the complexity of your projects and the quality of your records, not simply the size of the credit. A company with good contemporaneous records should expect to pay less, and to be told why.

Warning signs

• A quote based only on your turnover or headcount, before anyone has asked about the technical work.
• An assurance that "everything qualifies" or that review is unlikely.
• No mention of what happens if the claim is challenged.
• Reluctance to name who will sign the claim or to be named on it, where the scheme requires it.
• Pressure to file before your own technical team has reviewed the narrative.

Questions to ask before you sign

1. How is the fee calculated, and what is the estimated amount in money terms?
2. What is included: preparation only, or also responding to a review?
3. What happens to the fee if the claim is reduced, withdrawn or repaid?
4. Who does the technical work, and what is their background in our field?
5. Will our technical staff review and approve the narrative before filing?
6. What records will you need from us, and what will you keep on file?
7. Can we see an anonymised example of the claim documents you produce?
8. Are you willing to be named on the claim where the tax authority asks for it?

Independent benchmarks

Our sister initiative knowyourfees.org publishes independent guidance on fee structures for R&D claims and the questions to ask before you engage an advisor. Read it before you take a proposal, not after.

Doing some of it yourself

Many companies keep project identification and documentation in-house and engage an advisor only for calculation and filing, or for review support. That reduces fees and improves the claim, because the people who know the work are the ones describing it. Our in-house finance team program covers how to set that up.

Educational material, not advice. Fee arrangements are a matter of contract; take advice on any agreement before signing.