The Contingency Fees Charged by Scientific Research and Experimental Development Practitioners

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The Scientific Research and Experimental Development (SR & ED) Program is a $ 3.5 billion business incentive program in Canada administered by the Canada Revenue Agency (CRA). The program reimburses companies for eligible research and development expenditures in Canada. Since the application of an SR & ED application requires both an understanding of financial issues and technical scientific knowledge, small and medium-sized enterprises (SMEs) often do not have the internal resources to file themselves these requests. For example, SMEs often rely on SR & ED practitioners (or consultants) to help them prepare their SR & ED claims.

SR & ED consultants are paid in one of two ways: (unscheduled) success fees or fixed fees. Many SMEs and SR & ED consultants prefer contingency compensation models because they align the objectives of the company with those of the practitioner. However, the contingency model, associated with (1) the lack of regulation of SR & ED practitioners and (2) the inability of the CRA to verify all claims, led to cases of abuse. For example, according to The Globe and Mail, a consulting firm has, in one case, taken advantage of the absence or the regulation to make many dummy SR & ED claims that may not have been screened out. adequately by the CRA.

In the 2012 federal budget, it was announced that a study would be conducted on contingency fees billed by tax preparers. The federal government is concerned that the contingency fees imposed by SR & ED practitioners will reduce the benefits of the SR & ED program. Over the next year, a study will be conducted with all SR & ED stakeholders to determine if further action is required.

Whether the fees charged by practitioners are excessive or not is a hot topic of debate. A survey conducted by the sector shows that the country's six largest accounting firms pocketed combined fees of $ 117 million in 2010, which represents only a small portion of the billions of dollars in loans. tax granted. It should also be noted that fees collected by SR & ED practitioners have also decreased over time due to market forces: increased competition and increased government regulation.

In addition to the problem of contingency fees, there have been recent discussions about the regulation of SR & ED practitioners through SR & ED certification. Instead of removing contingency fees, the government may want to address the underlying regulatory issues and focus on regulating and certifying SR & ED practitioners. The question that is looming in the background, however, is whether SR & ED practitioners should self-regulate or whether the government should legislate to obtain compliance from practitioners.


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