Big changes coming for R&D in the life sciences sector

25 April 2022

With the most significant changes to research and development (R&D) since 2000 on the way, R&D tax reliefs are no longer a given. Life sciences and biotech businesses need to prepare now to avoid missing out on vital reliefs.

R&D tax relief has always been seen by the life sciences sector as a well-established and reliable tax incentive that fulfils its purpose by encouraging innovation. Spin-outs and start-ups in the sector have relied on the relief since its introduction in 2000, and it’s a valued support to cash flow in the early years before commercialisation.

Why is this happening?

21 years on from the introduction of R&D tax relief, changes are afoot. HMRC and HM Treasury are increasingly concerned that the regimes are open to abuse and need refocusing.

In a recent discussion with senior HMRC members, the proposed change to the status quo was described as, ‘one of the most fundamental policy shifts since the introduction of the regime’. Clearly, we are approaching a turning point.

While we support the underlying drivers for these changes – namely, to encourage businesses to ‘buy British’ and invest further in UK businesses, and end abuse of the system – we also have very real concerns about the consequences of restricting access to a tax relief that has been the lifeblood of early-stage businesses in the UK.

How can life sciences businesses prepare?

In this series of dedicated insights for the life sciences sector from our Innovation Relief specialists, we explain what is already known to be changing, what is intended to change in the next few years and, importantly, how this might affect your business.