R&D tax reliefs are designed to help incentivize investment by reducing the costs of innovation. In the UK, a new R&D-intensive company category creates a ‘highly effective’ way to do that for businesses taking significant financial risk with R&D, says the BIA: adding this will help enable life science entrepreneurs to crowd in further private investment.
Small and medium-sized enterprises (SMEs) that are investing over 40% of their total operating costs in R&D and not yet making a profit will receive a cash payment of 27p for each £1 they have invested in R&D. All other loss-making SMEs will receive a new lower relief rate of approximately 18p (which was announced in the Autumn Statement in November 2022).
Steve Bates OBE, CEO of BIA, said: “This is a huge boost for biotech companies across the UK developing new medicines and improving healthcare for patients. Our research-intensive industry is a key growth area for Britain’s economy. The Chancellor is rightly focusing UK taxpayer support to enable life science entrepreneurs to crowd in more private investment, help keep the UK at the cutting-edge of international science, and create new high-value jobs across the UK.”
There are over 6,548 businesses in the UK life sciences industry, and approximately 70-80% are SMEs. These businesses employ over 282,000 people and generated £94.2bn turnover in 2021. The number of businesses and the number of sites operated by these businesses have both seen an upward trend since 2009, with 23% more businesses and 32% more sites operating across the UK in 2021 compared to 2009, according to government statistics.
The UK accounts for 35% of all life science start-ups created in Europe since 2012, according to McKinsey data.
RQ Biotechnology, a company developing antibody-based treatments to protect immunocompromised people against COVID-19 and other future pandemic threats, is among those welcoming the new R&D tax relief rate.
Hugo Fry, CEO of RQ Biotechnology said: “As a small but ambitious London-based antibody discovery company, we’re really pleased to hear the Chancellor’s announcement this week of a special higher research and development tax relief rate.
"This will help us to go full steam ahead in our commitment to discover and develop infectious disease medicines for vulnerable patients. This announcement will really allow us to grow quickly, to build our portfolio, employ local talent and to continue our strong investment in the UK’s biotechnology sector.”
His comments were echoed by Infex Therapeutics, a North West biotech developing medicines to treat infectious diseases and tackle the threat of anti-microbial resistance.
“The new R&D tax credit system will give us the financial flexibility to continue to advance our pipeline of innovative treatments for life-threatening infections,” said Dr Peter Jackson, CEO.
“This is particularly important as the world faces a growing threat of infectious diseases and drug-resistant infections, which is placing a significant burden on global healthcare systems. There is an urgent need for new anti-infectives, and we will continue to support the UK's leading role in driving innovation in this area."
The BIA says it will continue collaborating with the Chancellor’s team: now focusing on a new R&D tax relief scheme, on which a public consultation recently closed.
“The new scheme being developed is a great opportunity for the UK to fine-tune and enhance what is already recognised globally as a key mechanism for incentivising SME investment in R&D and innovation,” said Steve Bates of the BIA.
“Going forward we need to ensure the UK’s support for highly innovative companies is globally competitive, eliminates fraud and targets taxpayers’ money into truly innovative businesses that are creating jobs and driving economic growth”