CFO Checklist: Navigating the UK R&D Landscape for Life Sciences
For life sciences CFOs, 2026 presents one of the most challenging funding environments in recent years. HMRC scrutiny has increased, while the UK’s R&D tax regime has changed significantly following the introduction of the merged scheme from April 2024.
For many biotech and medtech businesses, R&D relief remains an important source of funding. However, claims now require greater focus on documentation, eligibility and cash flow timing. Restrictions on overseas R&D have added further complexity, particularly for businesses carrying out international trials or specialist research activities abroad.
Below is a practical checklist for finance leaders looking to manage R&D tax risk while continuing to support innovation investment.
1. Understand the New Merged R&D Scheme
The former SME and RDEC regimes have now been merged into a single above‑the‑line credit system. Under the new rules, qualifying R&D expenditure generally attracts a taxable 20% credit, giving a net benefit of around 15%–16% depending on the company’s tax position.
Loss‑making “R&D‑intensive” SMEs may still qualify for enhanced relief of up to approximately 27% of eligible costs, provided they meet the required intensity threshold.
CFO action: Reassess expected claim values under the new regime and update forecasts accordingly. For many SMEs, support is lower than under the previous rules, making accurate budgeting and cash flow planning more important than ever.
2. Recalibrate Cash Flow and Accounting Expectations
The merged scheme changes both the presentation and timing of R&D relief. The credit is recognised as income in the profit and loss account rather than as a reduction in Corporation Tax, which may alter internal performance metrics and external reporting.
At the same time, cash receipt remains dependent on Corporation Tax filings and HMRC processing timelines.
CFO action: Build realistic timing assumptions into cash flow forecasts and ensure finance teams understand the accounting treatment of the merged scheme, so the financial contribution of R&D activity is reflected accurately in management reporting.
3. Strengthen Documentation and Compliance
HMRC continues to increase its focus on R&D compliance, and even legitimate claims are facing greater scrutiny. Additional reporting requirements, including the Additional Information Form and pre‑notification rules, mean claims now require stronger coordination between finance and technical teams.
CFO action: Ensure claims are supported by clear technical narratives and robust cost documentation. Qualifying expenditure should reconcile fully to payroll records, invoices and supporting evidence. Where projects involve complex scientific judgement, involve technical staff early so evidence is captured contemporaneously rather than retrospectively at year end.
4. Prepare for Increased HMRC Enquiries
HMRC’s compliance activity around R&D claims has increased significantly over the last two years, including for businesses with genuine claims.
CFO action: Treat R&D tax relief as a board‑level tax risk. Review claims critically before submission, particularly where there is significant year on year changes, complex subcontracting arrangements or judgement‑heavy areas of eligibility.
If using external advisers, ensure they are experienced in the life sciences sector and capable of defending the claim if challenged. Internally, maintain organised records, including technical reports, contracts, payroll support and project timelines, this is so that the business can respond quickly to enquiries.
5. Reassess Overseas R&D Activities
Many life sciences businesses rely on overseas trials, specialist laboratories or international research partnerships. From April 2024, overseas subcontractor and externally provided worker costs are generally no longer eligible unless the activity could not reasonably be undertaken in the UK due to geographical, environmental, or regulatory factors.
CFO action: Review overseas R&D activities currently included within claims and ensure there is clear, contemporaneous evidence supporting eligibility where required. It is also important to revisit subcontracting arrangements, as entitlement to relief now generally sits with the company initiating and funding the R&D.
6. Ensure All Eligible Costs Are Captured
While the reforms introduced restrictions, they also expanded certain qualifying expenditure categories. Cloud computing and data licence costs can now qualify where directly linked to R&D activities, which is particularly relevant for biotech, AI‑enabled, and digital health businesses.
CFO action: Review cost categories carefully to ensure all eligible expenditure is captured consistently, including software, cloud infrastructure, consumables and specialist data licences. Clear communication between finance and technical teams can help prevent valid costs from being overlooked.
7. Take a More Proactive, Cross‑Functional Approach
R&D tax relief can no longer be treated as a once-a-year compliance exercise. The complexity of the current regime means businesses benefit from ongoing collaboration between finance, tax, and technical teams.
CFO action: Hold regular discussions throughout the year to identify developments that may affect future claims, including overseas activities, grant funding, subcontracting arrangements or project changes. Encouraging scientists and engineers to document technical uncertainties as projects progress can also strengthen future submissions and reduce year‑end pressure.
Conclusion
The UK’s R&D tax regime remains valuable for life sciences businesses, but the compliance burden is now significantly higher than it was a few years ago.
For CFOs, the challenge in 2026 is no longer simply maximising relief, but balancing funding opportunities with governance, documentation and risk management. Businesses that take a more proactive and coordinated approach will be in a stronger position to secure relief confidently while avoiding unnecessary disruption. In a sector where funding remains tight and innovation cycles are long, getting this right can make a meaningful difference to both cash flow and long term growth.
If you’re reassessing your R&D claims or want confidence in your approach under the new regime, our specialists can help you navigate the complexities and reduce risk.
Contributors
Asma Aslam, Senior Tax Manager
Explore related insights
-
How to Account for Series Funding Rounds Under UK GAAP
Read more: How to Account for Series Funding Rounds Under UK GAAP
-
Balancing Cost, Innovation and Incentives: The R&D Subcontracting Challenge for UK Businesses
Read more: Balancing Cost, Innovation and Incentives: The R&D Subcontracting Challenge for UK Businesses
