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

Research and development (R&D) tax relief has supported the growth and success of the UK’s innovative life sciences sector since its introduction in 2000. However, despite their value, many aspects of how they support the sector have not been sufficiently evaluated. These include the ‘direct’ effects of the relief on R&D spending and ‘indirect’ effects on outcomes beyond firm turnover and hiring. There is also a lack of sector-specific estimates of effects. As a result, policy changes could have unintended consequences that run contrary to government policy to support the sector. 

This note 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) and fill these evidence gaps - ensuring that reliefs remain up-to-date, competitive, and well targeted.