Pharmaceutical industry and R&D Tax Relief

At the heart of most projects in the pharmaceutical industry lies R&D.  Yet, there is a false preconception that activities worthy of R&D tax relief are only done by drug development companies, even though there are many less obvious examples, such as suppliers of equipment, drug modification and specialist testing companies. As a sector that requires a substantial amount of investment at the beginning stages of any project, claiming pharmaceutical R&D tax relief could help alleviate some of financial stress. Despite this, around 90% of eligible companies do not claim, partly thinking that they are not eligible, and the others struggling to understand how to correctly identify and attribute R&D activities for HMRC.

Pharmaceutical industry and R&D Tax Relief

At the heart of most projects in the pharmaceutical industry lies R&D.  Yet, there is a false preconception that activities worthy of R&D tax relief are only done by drug development companies, even though there are many less obvious examples, such as suppliers of equipment, drug modification and specialist testing companies. As a sector that requires a substantial amount of investment at the beginning stages of any project, claiming pharmaceutical R&D tax relief could help alleviate some of financial stress. Despite this, around 90% of eligible companies do not claim, partly thinking that they are not eligible, and the others struggling to understand how to correctly identify and attribute R&D activities for HMRC.

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Only around 40% of qualifying companies pharmaceutical R&D tax relief. Are you part of the 60% not claiming?

Do you have a qualifying R&D project? Check below.

Between 2007 and 2016, the global pharmaceutical industry invested over $1.36 trillion in R&D, and forecasts predict that by 2022, global annual investment in R&D activity will be $181 billion.

There are a variety of activities that potentially qualify for pharmaceutical R&D tax relief, such as drug discovery, design of specialist equipment, manufacturing of drugs and their adaptations, testing, delivery, and packaging, to name a few. All throughout the life cycle of a drug, from development to commercialisation, there is the potential for a variety of companies to claim back some financial relief for the innovative contribution to the final product. Did you know that you can even claim relief on the money spent paying clinical trial volunteers? 

What is R&D tax credit?

The UK Government’s Research and Development Tax Relief scheme is a way to encourage and reward companies that are investing in innovation.

What qualifies as innovation? 

For tax purposes, R&D takes place when you are creating something that will advance the overall knowledge or capability in the field of science and technology. In simple terms, if you are solving industry problems, creating new software, process or materials, you qualify.

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what qualifies?

Most pharmaceutical projects involve some aspect of innovative R&D activity from researching a new compounds to make certain methods of types of drugs more accessible to different people, there is a lot of scope for innovative R&D work in the pharmaceutical business.

New software, innovative ways of storage, advances in drug delivery and clinical trials, can all count towards an R&D tax credit claim no matter whether they have been successful or not.

  • R&D of raw materials for drug production, methods of analysis and development of research software and development processes..
  • Manufacturing improvements, such as installing new or modernising existing facilities to ensure a certain quality of product.
  •  Have you developed a more sustainable way of managing your wastage?
  •  Are you doing innovative research to solve a problem that will advance science?
  • Are you thinking outside the box by tackling sustainability issues, such as using recyclable materials, reducing waste from contamination or the amount of materials you use?
  • Are you working on discovering new compounds that can be used for a medication?
  •  Are you developing new materials and compounds?
  • Have you carried out Phases 1,2, and 3 of clinical trials?
  • Have you done test batch production and production processes for evaluation?
  • Are you a specialist drug testing company that creates bespoke tests or clinical trials to analyse the effectiveness of a new drug?
  • Are you a supplier of specialist medical equipment?
  • Do you create variations of existing drugs where the method of delivery is adapted, such as making medication child friendly?
  •  Do you adapt existing drugs for the wider market, such as vegetarian and vegan substitutes.
  • Are you developing new types of packaging, such as eco friendly packaging or specialist child-resistant packaging?
  • Are you adapting the size and taste of a drug?

Eligible Activities

  • R&D of raw materials for drug production, methods of analysis and development of research software and development processes..
  • Manufacturing improvements, such as installing new or modernising existing facilities to ensure a certain quality of product.
  •  Have you developed a more sustainable way of managing your wastage?
  •  Are you doing innovative research to solve a problem that will advance science?
  • Are you thinking outside the box by tackling sustainability issues, such as using recyclable materials, reducing waste from contamination or the amount of materials you use?

Drug Development

  • Are you working on discovering new compounds that can be used for a medication?
  •  Are you developing new materials and compounds?
  • Have you carried out Phases 1,2, and 3 of clinical trials?
  • Have you done test batch production and production processes for evaluation?
  • Are you a specialist drug testing company that creates bespoke tests or clinical trials to analyse the effectiveness of a new drug?
  • Are you a supplier of specialist medical equipment?

Innovative Techniques

  • Do you create variations of existing drugs where the method of delivery is adapted, such as making medication child friendly?
  •  Do you adapt existing drugs for the wider market, such as vegetarian and vegan substitutes.
  • Are you developing new types of packaging, such as eco friendly packaging or specialist child-resistant packaging?
  • Are you adapting the size and taste of a drug?
See whether your company projects qualify for R&D tax relief

R&D tax relief scheme is remarkably inclusive but HMRC has specific guidelines on what companies can claim the benefit. Find out whether your project qualifies by clicking on the eligibility quiz button.

Project qualifies?
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Novel was created and developed by R&D tax relief consultants with decades of experience to help businesses support and sustain their operations by claiming R&D tax relief.