Improving the evidence base for R&D tax relief in the life sciences sector

The current research and development (R&D) tax relief scheme has enabled the UK's life science sector to flourish since its inception in 2000.

Yet, the extent of the present scheme's effectiveness has been recently called into question.

Many aspects of how they support innovative businesses, particularly in the life sciences, have not been sufficiently evaluated to inform policy change. As a result, policy changes could have unintended consequences that run contrary to government policy to support the sector.

This report explains the current policy context of R&D tax reliefs, argues for an evidence-based approach to tax policy, and summarises a paper produced by London Economics for the UK BioIndustry Association (BIA) identifying gaps in the evidence base relating to the impact of R&D tax relief on innovative sectors, and proposing a survey-based, cross-sector study to investigate the effects of UK R&D tax relief for small and medium enterprises (SMEs). This will fill these evidence gaps to inform a key tax policy within Labour’s industrial strategy, ensuring that reliefs remain up-to-date, competitive, and well-targeted.

The effectiveness of R&D tax relief in the life sciences sector