Accountants for biotech and health tech startups.

Biotech companies often go years without revenue and pay other organisations to carry out most of their research, so the R&D claim depends on who commissioned the work and where it was done.

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We act for UK biotech, life sciences and health-tech startups. Our work covers R&D claims where most of the spend is subcontracted, clinical trial payments, university spinout share structures, and cash forecasting for companies that will be years without revenue.

Biotech companies differ from most small companies in four ways. There is often no revenue for years, the largest costs are paid to other organisations, the share register often includes a university, and the R&D claim can run to six figures.

The main question is who commissioned the research. Under the merged scheme, the company that intended or contemplated the R&D claims for it. HMRC reads that as a specific appreciation of the work to be done, and general awareness that research was taking place is not enough. For a company whose research is carried out by contract research organisations (CROs) and academic partners, this decides who can claim.

A worked example of a claim built on contract research

A loss-making UK biotech company with no revenue yet, which is a small or medium-sized enterprise (SME) for R&D purposes. Total expenditure £1,200,000. Of that, £800,000 is paid to an unconnected contract research organisation for work done in the UK and £180,000 is in-house research payroll.

Subcontracted research is restricted to 65% for an unconnected party: £800,000 × 65% = £520,000.
Qualifying total: £520,000 + £180,000 = £700,000.
Intensity: £700,000 ÷ £1,200,000 = 58%, so the intensive route is available.
Intensive route: £700,000 × 186% = £1,302,000 surrendered, at 14.5% = £188,790 in cash.
Loss check: with no revenue, the trading loss is total expenditure of £1,200,000 plus the extra deduction of £602,000 (86% of £700,000), a total of £1,802,000, which is enough to cover the £1,302,000 surrendered.
Cap check: the £188,790 is paid in full only if PAYE and National Insurance for the year are at least £56,264, because £20,000 + (300% × £56,264) = £188,792. Below that, the credit is limited to the cap unless the company qualifies for the exemption: all or most of the work of creating or managing its intellectual property must be done by its own employees, and payments for subcontractors and externally provided workers from connected companies must be no more than 15% of qualifying R&D spend.

All of this depends on whether the company commissioned the research with a specific appreciation of what would be done. If the contract research organisation took the initiative, the claim belongs to it. The contracts settle this, so we read them first.

Illustrative figures. We run the calculation on your own numbers before anything is filed.

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What a pre-revenue life sciences year looks like

Subcontracted research: Payments to contract research organisations and academic partners, generally restricted to 65% of the cost for unconnected parties. Who can claim depends on who commissioned the work, which the contracts settle.
Clinical trial payments: Payments to people taking part in clinical trials are a qualifying cost under the rules, and are easy to miss in a first claim.
The spinout share register: University equity, founder shares and often a translation fund, which invests in turning university research into companies. The structure is usually set when the spinout is formed, so review it before an institutional funding round.
A runway measured in years: The cash forecast is the main management tool, so update it whenever plans change. Grant payments, milestone payments and trial timetables all move, and the forecast has to move with them.

The questions HMRC asks about biotech claims

Who commissioned it. Where R&D is contracted out, the customer claims if it intended or contemplated that R&D would be done, which requires a specific appreciation of the work. Where the contractor took the initiative, or the customer is not within the charge to UK tax, the contractor may claim instead. For a company running its programme through contract research organisations, this decides the whole claim, and the contracts that settle it are usually signed long before anyone thinks about tax.

Where it happened. For accounting periods beginning on or after 1 April 2024, payments to subcontractors for R&D done outside the UK are excluded, and so are payments for externally provided workers whose pay is not subject to UK PAYE. The company's own employees working abroad are not affected. The exception is work that needs conditions the UK does not have, such as a disease or patient group found elsewhere, or a legal or regulatory requirement, where it would be wholly unreasonable to replicate them here. Cost and the availability of staff do not count. Companies with a registered office in Northern Ireland that claim the intensive route are not subject to the restriction. Instead, their relief under that route is limited to €300,000 over three years for most businesses. Those with no trade in goods and no electricity market activity can opt out, which brings the restriction back and removes the limit. A trial run across several sites needs this settled site by site.

Intensity. The intensive route is open to an SME (fewer than 500 staff, and turnover of no more than €100 million or a balance sheet of no more than €86 million, counting linked and partner businesses) that is loss-making and spends at least 30% of its total expenditure on qualifying R&D. It pays up to about 27p for each £1 of qualifying spend, and a company that qualifies can still choose the merged scheme instead. Run the calculation before anything is filed.

How we handle R&D claims SEIS and EIS

What we do for biotech companies

A review of the research contracts, so the right company claims and the claim stands up to an HMRC enquiry
Clinical trial payments, consumables and subcontracted research costed and evidenced
The intensity test run before the route is chosen
Spinout share structures, founder equity and section 431 elections, which can keep later growth in the value of restricted shares out of income tax
SEIS and EIS advance assurance, and the certificates your investors need afterwards
Cash forecasts built around trial milestones and grant payment dates

Common questions

Most of our research is done by a contract research organisation. Who claims the relief?

The company that commissioned the R&D, which is usually you, provided you intended or contemplated that R&D would be done. That means a specific appreciation of the work, and general awareness is not enough. Where the contractor took the initiative, or where the customer is outside the charge to UK tax, the contractor may claim instead. The contracts decide it, so review them before the first claim.

Do payments to clinical trial subjects qualify?

Yes. Payments to people taking part in clinical trials are a specific category of qualifying expenditure. They are easy to miss in a first claim because they do not fit the usual cost categories.

Our trial runs partly overseas. Is that spend claimable?

For accounting periods beginning on or after 1 April 2024, payments to a contract research organisation or trial site for work done outside the UK qualify only if the trial needs conditions the UK does not have, such as a disease or patient group found elsewhere, or a legal or regulatory requirement, and it would be wholly unreasonable to replicate them here. Cost and the availability of staff do not count. Your own employees working abroad are not affected, and companies with a registered office in Northern Ireland that claim the intensive route are exempt unless they opt out. A trial run across several sites usually needs the position settled site by site before the claim is prepared.

We are a university spinout. Does that change anything?

It changes the share register. The R&D position is the same as for any other company. A university holding, a translation fund and founder equity need to fit together in a structure an institutional investor will accept, and vesting and section 431 elections are usually worth putting in place early.