Consultation on R&D tax credit scheme

The Government is currently consulting on proposals, which suggest that there should be a cap on the distribution of research and development (R&D) tax credits for struggling small and medium-sized enterprises (SMEs). Moreover, the BioIndustry Association (BIA) has raised concerns that if implemented, this could harm a thriving sector.

According to the BIA, introducing a cap would mean that young businesses that are trying to survive between venture capital fundraising projects would lose a valuable source of finance.

As a spokesman for the Association pointed out, while the Government’s aim is to weed out fraudulent claims, analysis has shown that the measure will have unintended consequences for life science companies, with between 50 and 60 per cent of genuine SMEs potentially affected, including start-ups and those funding clinical trials in a sector characterised by a high level of R&D outsourcing.

He added that the UK life sciences sector is an economic success story, as businesses in the sector have created highly skilled jobs and provided a platform for the UK to be at the forefront of innovative science and treatments that will benefit patients now and going into the future.

While the Association accepts that the Government had the best of intentions, these proposals could put a hard brake on the UK’s rapidly expanding biotech start-up and scale-up community and affect other tech sectors in similar ways.

The Association believes that it will also have knock-on effects for hundreds of service and supply SMEs across the UK, who will see a loss of business, as well as universities and hospitals that receive significant funding from industry and conduct clinical research.

Therefore, the BIA is calling on all life sciences businesses to respond to the Treasury and HMRC consultation. The consultation closes on 24 May.

Rob Chedzoy, Tax Partner at Milsted Langdon, said: “The proposals for a cap on R&D tax credits could have a significant impact on SMEs, with a potential source of income being restricted. So the consultation is of vital importance.

“If you need advice on how this issue may affect you, please contact us today.”

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