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The Canadian Government has recently announced an investigation into the contingency fees charged by consultants to assist in the preparation of the company’s SR&ED claim. They’re looking for companies to assist in their review of the landscape. We will be providing a full explanation of the study, as well as a copy of our submission to the committee in upcoming weeks. In the meantime, here is a brief primer.
Rationale for the Study
As outlined in the recent 2012 budget, the government is concerned that high contingency rates are allowing third party consultants to greatly benefit from first time claimants. As the SR&ED program is designed to foster and reward technology development in Canada, these third-party fees could be seen as diluting the incentive program. Several articles have been published in the public media about the ‘corrupt’ SR&ED program and the ‘cottage-industry’ of consultants which have sprung up to take money from the government for routine activities. The goal of this investigation is to see how valid these concerns are. We have addressed some of these concerns on our site in earlier posts, but we will formally respond to the government in this study.
The government is also interested to hear why the majority of third party services are contracted through a contingency, or success-based agreement, as opposed to a more traditional hourly or fixed-fee arrangement.
Several prominent organizations have taken notice of this study, and there has been lively discussion on specialized LinkedIn groups. We have commented on consulting fees in the past, and we will provide our own insight in the upcoming weeks.
The deadline for submissions is October 1, 2012; details on the submission process can be found at the CRA information page here.