Many startups in the life sciences space operate for years before generating revenue, and rely heavily on grants, angel investment, and venture capital to fund R&D and reach key technical milestones. But there’s another valuable, often underutilised, source of non-diluted capital: R&D tax credits.
These credits, offered by HMRC in the UK and Revenue in Ireland, can return a significant percentage of your eligible R&D spend, even if your company is pre-revenue or loss-making.
For example, UK startups can receive up to 27% of qualifying R&D expenditure as a cash payment under the SME (ERIS) scheme, or around 15-16% via the new RDEC (merged) scheme where the company does not meet the ERIS criteria or has undertaken grant-funded work.
What Can You Claim For?
Qualifying expenses include:
Staff time
Salaries, NI, and pensions for technical staff engaged in R&D
Materials
Lab materials and reagents used in experiments; prototypes if they are part of resolving scientific/technical uncertainty
Software
Tools and platforms essential to R&D
Subcontractors
External providers doing qualifying technical work
Why It Matters
Accessing R&D credits can materially extend your funding runway. This cash injection might help you fund an extra month or two of lab work, bridge to your next funding round, hire a key researcher and reduce the risk of taking on new projects.
Make It Part of Your Strategy
To get the most value from R&D tax credits, startups should plan ahead.
That means:
- Working with accountants early in the year—not just at tax time.
- Setting up bookkeeping and time-tracking systems to capture R&D activity and expenditure.
- Keeping technical documentation to justify the scientific or technological uncertainty being addressed.
This proactive approach ensures your bookkeeping, record-keeping, and time-tracking are set up to support a strong R&D claim. This not only strengthens your eligibility but also creates a scalable framework to support the growth of future R&D activity.
In short, R&D tax credits aren't just a rebate, rather they are a strategic funding tool. If used well, they can give your startup the breathing room to grow smarter, faster, and with less reliance on equity capital.
Talk to our specialists at MHA to optimise your R&D claims, extend your funding runway, and integrate this vital support into your long-term growth strategy.
At MHA, we help innovative businesses optimise R&D claims and align funding with long-term growth.
If you’re looking to strengthen your strategy, our team is here to help.
