The foreword to the Life Sciences Sector Plan explains how over £2 billion worth of UK Government funding will be used to unlock the potential of a sector that “creates jobs, drives investment, and powers innovation across our economy.”
At the heart of the plan is a commitment to “enabling world class R&D” within the life science sectors of pharma and MedTech, as well as “making the UK an outstanding place in which to start, grow, scale, and invest.”
To encourage such R&D spending, the UK Government offers tax relief through R&D Tax Credits. For accounting periods beginning on or after 1 April 2024, most companies (large and small) will access this support through the merged R&D expenditure credit. This provides an above the line expenditure credit based on what has been spent on certain eligible R&D activities.
In this article, we look at what the Life Sciences Sector Plan says about driving pharma and MedTech investment, and how R&D Tax Credits can help boost innovation.
Why is the UK Government investing in life sciences, pharma and MedTech?
The Government sees investing in life sciences, pharma and MedTech as a way to grow the economy and modernise the NHS at the same time.
The UK is already a leader in healthcare and pharmaceuticals R&D, with innovative startups and global enterprises conducting world-class research and development that drives very successful breakthroughs. In fact, the Life Sciences Sector Plan reports that, in 2023, the value of UK exports of medical technology products was £10.1 billion, with pharmaceutical exports at £25.6 billion, describing life sciences as already playing a “distinct and strategic role” in driving UK economic growth.
How will the UK Government drive R&D in life sciences, pharma and MedTech?
The Life Sciences Sector Plan makes it clear that more private investment is needed if the UK is to meet its growth goals. R&D Tax Credits offer one way of doing this, but there are wider challenges within the life sciences industry that need to be addressed. For example, while pharmaceutical R&D made up 17% of all UK business R&D in 2023, (the highest of any sector), there are currently struggles with both commercialisation and adoption.
The Government’s target is for the UK to be the leading life sciences economy in Europe by 2030, and the third most important life science economy in the world by 2035 (behind the US and China).
To achieve this vision, they outline six headline actions (although the Plan actually lists dozens of smaller actions directly and indirectly related to boosting R&D). Their headline actions include:
- Realising a Health Data Research Service (HDRS): Investing up to £600 million to create “the world’s most advanced, secure, and AI-ready health data platform.”
- Slashing trial set up times to under 150 days: Cutting delays to double commercial interventional trial participants by 2026 (and then again by 2029).
- Backing manufacturing with up to £520 million: Bringing globally mobile manufacturing investments to the UK to create high-value jobs and secure the UK’s supply of medicines.
- Streamlining regulation and market access: Making the approval process for new drugs faster so that patients can benefit from new cutting-edge innovations sooner.
- Introducing low-friction procurement: Making it easier for companies to access the NHS through a Rules Based Pathway (RBP) for MedTech and an NHS ‘Innovator Passport’.
- Partnering with industry to drive growth and innovation: Securing at least one major strategic partnership a year with leading life sciences companies, while helping startups to scale, attract investment and stay in the UK.
What are examples of medical technology (MedTech)?
Medical technology (MedTech) is essentially any type of medical device or piece of software that helps diagnose, monitor, treat, alleviate and manage people’s health.
Examples include:
- General medical devices such as ECG monitors, CT scanners and dialysis machines (including the software used for operating them
- Surgical robots
- Automated diagnosis machinery
- Active implantable medical devices (AIMDs) such as pacemakers, neurostimulation devices, or cochlear implants
- In vitro diagnostic tests such as pregnancy test kits or disease test kits
- Wearable devices that can detect disease early
- AI tools such as cancer scanners
- Predictive risk assessment platforms
- Mobile health apps
- Clinical decision-support software
How can the life sciences, pharma and MedTech sectors benefit from R&D Tax Credits?
R&D Tax Credits can help MedTech and pharmaceutical companies de-risk innovation by providing tax relief on qualifying research and development costs. To qualify for R&D tax relief, a project must seek to achieve an advance in a field of science or technology through the overcoming of scientific and technological uncertainty.
If you’re eligible, you can claim R&D tax relief on costs such as:
- Staff costs (e.g., salaries and pension contributions for scientists, researchers, engineers or developers working on a new diagnostic device or drug development trial).
- Software (e.g., software used to support medical imaging analysis or clinical data processing).
- Data licence and cloud computing costs (e.g., licences for datasets used to train or validate AI models for diagnostics, drug discovery or patient risk prediction).
- UK-based contractor payments (e.g., payments to a UK-based specialist supporting prototype manufacture, testing, or lab work).
- Consumables (e.g., chemicals, laboratory materials, or energy used during testing or trials).
- Prototypes (e.g., materials used to build a prototype medical device, where it is not a finished product meant for sale).
- Some indirect activities (e.g., certain admin, maintenance or support activities that are directly related to qualifying R&D work).
Find out more: What qualifies as R&D expenditure for claiming tax relief?
Medilink UK: Medilink is a unique life sciences network and specialist services provider. As a strategic partner, we support their network with tailored tax consulting services, helping businesses access the funding they need to accelerate research, invest in new technologies, and scale with confidence. We also sponsor the ‘Primary / Social Care Partnership’ category at their Healthcare Business Awards.
Amprologix: Amprologix used R&D tax relief to advance Epidermicin NI01 and combat antimicrobial resistance. They were initially worried that a claim would take a lot of time and effort, especially given that they work in a complicated field, but Leyton’s experienced specialists did all the heavy lifting, quickly putting them at their ease.
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