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Life sciences R&D – biotech innovation and funding

Peter Beavis Sector Specialist
Senior Sector Specialist
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a robot performs an operation on a child's tool to symbolise automation technology in healthcare

What is life science?

Life science is a diverse field. It encompasses all branches of science that study living matter — from anatomy to zoology. Commercial efforts focus on biotechnology and the pioneers who seek to solve health and well-being challenges associated with an ageing population.

Advances made in the biotech industry can help us all live longer, healthier, happier lives. And when your company’s ideas, research and development are properly rewarded, you may hit the jackpot too. Here’s how.

The UK government wants to support your innovative work. In late 2017, it published (and in 2018 updated) a raft of incentives and initiatives to benefit life sciences, under its Life Sciences Sector Deal. These include a pledged increase in R&D funding to £12.5bn by 2021/22.

The government provides valuable incentives called R&D tax credits. These can be worth as much as 27p for every pound spent on R&D. You may already be claiming. But are you claiming as much as you could?

The UK is a global leader in biotech life sciences: more than 5,500 companies here turn over in excess of £70bn and employ 240,000 people. Biomedical engineering has nearly 2,500 service and supply chain firms.

If you are an SME in this supply chain, it’s highly likely that much more of your everyday activity than you realise may qualify for R&D tax credits.

Life science and biotech innovation

At ForrestBrown, we regularly uplift the value of R&D tax credit claims prepared by others. We do this by finding further qualifying projects and spending, that may have been missed.

For example, it’s not just drug formulation that qualifies. The tax incentive is much broader than that. Examples of biomedical research that may form part of a claim include:

  • Developing new medical devices, compounds or medicines.
  • Researching alternative uses for current medicines.
  • Building a manufacturing facility or opening a new production line.
  • Running clinical trials and other testing to gain regulatory approval.
  • Trying to improve existing products, like extending shelf life.
  • Making manufacturing processes more efficient or scaling them up.
  • The work done by continuous improvement teams.
  • Creating prototypes for testing.
  • Software development, including algorithms.
  • Curating and analysing large amounts of data.
  • Developing robotics or automation for your manufacturing process.
  • Improving your testing methods or the machines you use for testing.

Specific R&D in biotech

Here are some more specific  examples of biomedical R&D. They may help you relate what you do to the R&D tax credit incentive.

Diagnostic advances

Diagnostics is an exciting area of biomedical research and development. Developing ‘frugal technologies’ is a hot trend. Typically, these provide diagnostics locally and speedily. They use small, low-cost devices that are less invasive.

One company we’ve advised in this field specialises in confocal microscopy. Their novel optical imaging technique has many advantages. One of these is evaluating a subject without touching it.

They are applying this technology to a pachymeter, which measures cornea thickness as part of the test for glaucoma. Doing so allows the procedure to be carried out on the high street via a cheap handheld device instead of under anaesthetic in a medical centre.

Wellbeing technology

With most of us carrying a smartphone in our pocket, wellbeing tech is going from strength to strength. A host of apps promote mindfulness, improved diets and exercise regimes. And the rise of wearable tech means it’s much easier to record metrics on everything from blood oxygen levels to the number of steps we take in a day.

Much of this technology is now pretty standard. But there are still many ways you may be innovating, both physically and digitally. For instance, using established technologies in new ways. Or trialling a range of materials to optimise your product.


From state-of-the-art diffusers to smart inhalers that remind patients to puff, meditech is improving healthcare delivery in clever ways. As costs have come down, virtual reality (VR) is beginning to capture the imagination. Tech firms are successfully applying VR to healthcare, as a form of distraction therapy. This can ease both stress and pain. It’s been shown to work at a blood bank in France and during cystic fibrosis treatments at a Welsh hospital.


Along with changing user needs, the arrival of new materials and technologies mean medical equipment biotechnology R&D is thriving. For example, as more people are deemed overweight, there’s a greater need for bariatric equipment that caters for larger, heavier patients.

Prosthetics is another area of biotechnical research and development which evolves rapidly. In our article on the collision between biotech and AI, we look at how AI is being used in artificial limbs. For example, by adding stumble recovery technology.


Digital tech is driving an exciting new era of drug discovery. This digital R&D complements traditional R&D in medicine. We explore this topic in our blog Pharmaceuticals – Beyond the drugs.

In our work with drugs firms, one client was developing a generic version of a gout medicine. Their R&D involved commercially synthesising the active pharmaceutical ingredients cost-effectively and reliably.

I have written a separate blog to provide more insight on R&D in pharma.

Life science research funding

The opportunity in life sciences is not lost on investors. UK biotech attracted record sums of investment in 2018 as investors ploughed in £2.2 billion according to the Financial Times. That’s £1 billion more than the year before, for context.

These investors will want to know that all non-equity funding strategies for biotech are being used. They love R&D tax credits as one of these strategies. According to the Association of the British Pharmaceutical Industry, pharmaceutical R&D spending hit £4.3 billion in 2017.

Plus biotech is often grant funded. As a result, they focus on grant-funding cycles. But, if you are paid a grant by a biotechnology fund, you should not neglect the role of R&D tax credits. They can get extra cash into your business between biotech VC funding rounds.

Grants don’t rule out R&D tax credits. A common myth is that the two funding sources cannot be combined, but it’s not true. In a detailed article, we explain how grants and R&D tax credits work together. If you are seeking biomedical research funding, we’d advise you to speak to one of our experts as early as you can. This will ensure you make full use of both funding sources for biotech.

R&D tax credits for life sciences and biotech

R&D tax credit claims are based upon your qualifying R&D activities and costs. The average SME claim is worth about £54,000. But many life science firms get much more and it has a transformative impact.

Research and development expenditure in biotech

As far as what counts as R&D for biotech you can include costs of:

  • Salaries of staff. Plus employer’s NIC, pension payments and reimbursed expenses.
  • Subcontractors or freelancers.
  • Consumables (such as heat, power and light) and materials that are used up or transformed by the R&D process.
  • Certain types of software.
  • Payments to participants in clinical trials.

The value of R&D tax credits is when you think about what you can spend the money on: staff retention, hiring STEM talent and growing your business.

Get expert R&D tax credit advice for your life science business

ForrestBrown is the largest specialist R&D tax credit consultancy in the UK. We’re made up of chartered tax advisers, chartered accountants, sector specialists, lawyers and former HMRC tax inspectors.

Working with ForrestBrown, you benefit from robust R&D tax claims with all the evidence required to satisfy HMRC. Get in touch today.