Changes to the Finance Act impacting R&D claims for life sciences companies

Life sciences companies have been benefiting from the R&D tax relief schemes, with the incentive being invested in the innovative activities these companies have claimed. The proposed changes announced by the Chancellor as part of the Autumn Statement will impact the benefit these companies will be able to claim from 1 April 2023.

Although the government announced its continued support for the R&D undertaken in the UK by life science companies, it’s been noted that the generosity of the SME regime makes it a target for fraud; as such, a reduction in the SME rates was proposed.

Life sciences companies currently claiming R&D tax relief will benefit from a reform of the schemes which will expand the qualifying expenditure to include data and cloud costs, and the expansion of the R&D definition to include pure mathematics (further information is yet to be published). However, the schemes will refocus the support towards innovation in the UK (unless in a limited number of cases where the R&D needs to be conducted in a different geography). In the case of life sciences companies, such exemptions can be instances in which a vaccine/drug was developed, and it needs to be tested on a specific demographic.