The United Kingdom is home to one on the most developed healthcare sectors in the world, with approximately 48% of all UK R&D funds being directed to this sector.
Throughout the COVID-19 global pandemic, we’ve all seen just how important it is to have funding that supports the research and development activities required by the healthcare sector to developing life-saving drugs, in which the costs associated can be significant.
Below, we’ll take a look at how R&D tax credits impact the UK Healthcare sector, how R&D spending in this sector is shifting, and what sorts of activities are covered by R&D tax credits.
R&D expenditure on the UK Healthcare sector
Expenditure on R&D in the healthcare sector is hefty, in which there was approximately £4.8 billion of R&D spend?in the pharmaceutical industry in 2019 and over 29,000 people employed. It is by far the industry with the most R&D activity in the UK.
What’s more, the UK Finance Minister, Rishi Sunak, has recently pledged to spend £5billion on healthcare related R&D before 2025. Recognising the importance of R&D in helping our society reopen and our economy begin to recover after the pandemic has been the primarily the reason for further investment. As part of the reform, the UK government plan to modernise R&D tax reliefs to include data and cloud computing that is essential for life science firms in discovering and developing life-changing therapies for patients.
Currently, a significant amount of R&D costs is spent in clinical development and preclinical research, which are eligible costs for R&D tax credits. It’s critical that companies working within the healthcare and pharmaceuticals sectors are aware of R&D tax incentives as they offer excellent opportunities for cashflow; especially where funding may be hard to come by.
What are R&D tax credits?
R&D tax credits are available to companies developing new products, processes, techniques, or formulas that result in improved functionality, reliability, and performance. Many organisations require the help of an R&D Tax Consultant to help them apply for the relevant tax credits.
To find out more about the role of an R&D tax consultant, head over to our blog post by our consultant Julie Burtin.
Examples of qualifying expenditure in healthcare
The following examples are by no means exhaustive, but will give a sense of which costs in the healthcare sector are eligible for R&D tax relief.
Drug discovery is one of the largest aspects of the pharmaceutical industry where R&D tax credits are claimed. The development of a drug or treatment and its chemical research and further testing is a prime example of R&D in the pharmaceutical industry. From the data available, we can see that most of the qualifying activity for Pharmaceutical R&D Tax Credits occurs in the clinical trials of Phase I-III.
Devices in the medical field often show evidence of R&D. This includes devices for administering drugs or monitoring patients.
Testing Methods that are being developed are equally eligible for R&D Tax Credits. Although there is a presumption that R&D Tax Credits only apply to the final product and not to its manufacturing process, the production and associated activity very much qualify. By using technology to improve the efficiency or efficacy of a testing method, a company can be entitled to R&D Tax Credits.
Development and improvement of products, processes or services are often forgotten as aspects of R&D but can yield great results. For example, companies that seek to make a process more efficient, effective or to improve the results of an existing product may qualify for pharmaceutical R&D Tax Credits. This includes improvements like sterility, speed of process or fitness for market (i.e. a sugar-free drug).
Clinical trials were specifically given the position of qualifying expenditure, as they did not fall into any of the previously outlined categories but were crucial to R&D. The costs of paying trial volunteers can be claimed as R&D expenditure.
Transferring to the R&D Tax Sector from another career path
While the role of an R&D Tax Consultant may seem like a highly specialised role where you need financing qualifications and prior experience, it’s a highly transferable role.
Given the varied nature of projects an R&D Tax Consultant works on, it is critical that the consultant has a range of transferable skills that enable them to take a deep dive into client’s cases within a specific industry.
Leonid work with a wide range of professionals who are looking to make a change to a different career path. In our experience, those with a technical or research background enjoy a high level of success within the R&D industry.
Overall, it’s clear that there is a significant amount of activity going on in the UK healthcare sector when it comes to R&D activity. As the government continue to pledge more investments into the UK healthcare sector, more and more businesses within this industry will require the help of R&D Tax specialists to help them navigate the R&D tax credit process.
Interested in making a career change? We’d love to have a casual conversation with you on the opportunities that could be available to you. Please get in touch here.