Life sciences companies do more sustained, better documented R&D than almost any other sector, and the current reliefs reward it well. A profitable company keeps 15p per £1 of qualifying spend under the merged scheme; a loss-making, R&D-intensive company can receive up to 26.97p per £1 in cash under ERIS. The difficulty is rarely whether the science qualifies. It is the structure around the science: grant stacks, CRO and CDMO contracts, clinical trials and long pre-revenue phases, each of which changes how the claim should be built.
What counts as qualifying R&D in life sciences?
Work that seeks an advance in a field of science or technology by resolving uncertainty a competent professional could not readily resolve. That is the statutory test, and life sciences work meets it more naturally than most. At concept level, qualifying projects look like:
- taking a therapeutic candidate through target validation, preclinical work and clinical development, where safety and efficacy in humans cannot be deduced from existing knowledge
- developing an assay or diagnostic where existing methods cannot reach the sensitivity or specificity the application demands
- scaling a bioprocess from bench to production volumes, where yields and stability do not survive the transfer
- formulation and delivery work where a compound’s stability or bioavailability defeats known approaches
Not everything in a lab qualifies. Routine testing to established protocols, and projects whose only uncertainty is commercial, sit outside the definition. The boundary matters, because HMRC currently checks roughly one in six R&D claims. Our guide to what counts as qualifying R&D sets out the full test.
Which scheme will a life sciences company claim under?
Profit and R&D intensity decide it. On the standard worked example of £100,000 of qualifying spend:
| Position | Credit | Net cash benefit |
|---|---|---|
| Merged scheme, profitable at the 25% CT rate | £20,000 gross credit | £15,000 |
| Merged scheme, loss-making | £20,000 gross credit, notional tax at 19% | £16,200 |
| ERIS, loss-making and R&D-intensive | £26,970 payable credit, not taxable | £26,970 |
The merged scheme is a 20% taxable credit available to companies of every size. Enhanced R&D Intensive Support (ERIS) is reserved for loss-making SMEs whose relevant R&D expenditure is at least 30% of their total relevant expenditure, a test most pre-revenue life sciences companies pass comfortably. Check your own ratio with the ERIS intensity calculator, or put figures on a claim with the claim value calculator.
Does grant funding reduce the claim?
No, not for accounting periods beginning on or after 1 April 2024. The subsidised-expenditure rules were abolished alongside the old SME scheme, so Innovate UK and other grant funding no longer blocks or reduces relief under the merged scheme or ERIS, and neither current scheme is notified state aid. A great deal of online guidance still says otherwise, because it describes rules that no longer apply.
This change matters most in life sciences, where grant stacks run deeper than in any other sector. A company can now take the grant and claim relief on the same project’s qualifying costs. The detail is in grant funding and R&D tax relief, and the sector application in Innovate UK grants and R&D tax relief together.
Who claims when a CRO or CDMO does the work?
Usually the sponsor. Under the merged scheme, the customer claims contracted-out R&D where it intended or contemplated the specific R&D when the contract was made, and a sponsor commissioning a defined study almost always did. Payments to an unconnected CRO then enter the sponsor’s claim at 65%.
Two restrictions need active management. Subcontracted work generally qualifies only where it is undertaken in the UK. And overseas trial costs qualify only under the qualifying overseas expenditure exception, for example where the patient population a trial needs is not available in the UK and cannot reasonably be replicated here; cost savings are expressly excluded as a justification. Payments to clinical trial volunteers are a qualifying cost category specific to this sector. We cover the contracts in CRO contracts and R&D tax relief: who owns the claim? and the trials in clinical trial costs in R&D claims.
How does relief work through the long loss-making years?
ERIS exists for exactly this phase: it converts R&D losses into cash years before profitability, at up to 26.97p per £1. Three rules shape the planning:
- The grace period. A company whose intensity dips below 30% after a qualifying year keeps ERIS for one further year, which protects companies whose spending profile is lumpy.
- The PAYE cap. Payable credits under both schemes are limited to £20,000 plus 300% of relevant PAYE and NIC. A small internal team directing a large outsourced programme can hit it, though an exemption applies where the company is creating or managing intellectual property and connected-party subcontracting stays low.
- Claim notification. First-time claimants, or companies that have not claimed in the previous three years, must notify HMRC within six months of the end of the period of account. Miss the window and the claim is invalid, however strong the science.
The intensity arithmetic for a typical pre-revenue burn profile is worked through in ERIS for pre-revenue biotech and medtech.
Looking for biotech or medtech specifically?
This page covers the sector at umbrella level. For platform and asset development, the PAYE cap exemption and first-claim deadlines, see R&D tax credits for biotech companies. For device development, prototyping, regulatory testing and clinical evaluation, see R&D tax credits for medtech companies.
Why life sciences companies work with LimestoneGrey
LimestoneGrey is a firm of chartered tax advisers and chartered accountants specialising in R&D tax relief working with life sciences companies across the UK from our Cardiff base. In 2026 we were named a finalist at the One Nucleus Awards for Most Innovative Professional Services Company, and we work within the sector’s networks rather than at arm’s length from them. Every claim is prepared by our specialist team and signed off by a chartered adviser, and enquiry support is included as standard in every engagement: see how we defend claims under enquiry.
“Working with LimestoneGrey has been a genuinely positive experience. Their communication is clear and proactive and they are always on hand to answer queries and provide reassurance throughout the process. We have complete trust in their expertise and feel confident that our claims are being handled professionally.”
Dr Varghese, Laennec AI Limited
Whether you are preparing a first claim, changing adviser or partway through a grant-funded programme, talk it through with a chartered adviser. We will tell you which scheme applies and agree the fee before any work starts.
Written by Matthew Jones ACA CTA. Last reviewed July 2026.