By Chris Evans, Head of Taxation
We know the Budget can be a minefield, with reams of information to sift through, so our head of taxation, Chris Evans, has done the hard work for you. Here are Chris’s key tax takeaways that relate to the life sciences sector and beyond:
Corporation Tax
R&D tax reliefs simplification – There are plans to make R&D tax reliefs easier to access by simplifying administration. This means the Claim Notification Form will be removed from 1 April 2027, and the Additional Information Form (AIF) will be simplified from Autumn 2027.
HMRC have not yet released details of the intended changes to the AIF; however, their published document indicates that the changes will simplify and rationalise the form, reducing the amount of information necessary. Secondary legislation will be passed to bring about the changes; we’ll update you on this when we have draft legislation to review.
Capital allowances – the main rate of Writing Down Allowance is set to reduce to 12% in a bid to increase revenue. However, First-Year Allowances will increase to 50%, so there will be more benefit up front for affected assets.
There are no changes to Annual Investment Allowance, nor to other capital allowances.
Personal Tax
Founders’ Relief – reduced rate of Capital Gains Tax (CGT) on first £10m of lifetime gains from 6 April 2027. The Treasury has published its initial thoughts on qualification criteria, indicating that relief will be available to individuals who:
Have held 25% of the company’s ordinary share capital, voting rights and rights to distributable assets on a winding up, at the time when the relevant company’s trade commenced (or preparation to trade commenced),
To have held the disposed shares for at least five years before disposal, and
To have been continuously UK resident for at least five years before disposal.
Relevant companies are those which:
Have been in the scope of UK Corporation Tax for at least five years leading up to the disposal,
Are trading companies, or parent companies of a trading group,
Continue the trade for which it was established when the Founders’ shares were issued,
Have generated at least £10m turnover in the accounting period prior to the disposal, and
Have employed at least 15 qualifying full-time equivalent (FTE) employees in the accounting period prior to the disposal.
And there are further Growth and Innovation Criteria – at least two of the following three tests will need to be met:
Turnover growth of at least 25% across three consecutive accounting periods within the ten years before disposal – turnover must have reached at least £10m in the accounting period before the consecutive growth starts to be measured,
Headcount growth of at least 25% over three consecutive accounting periods within the prior ten years, with measurement starting after the first accounting period with an FTE headcount of 15,
Incurred R&D qualifying expenditure of £1.5m or greater in an accounting period and successfully claimed R&D tax credits on the expenditure in the three years leading up to disposal.
Overall, this is quite a shopping list of criteria, and we will be feeding back our thoughts to HMRC as part of their consultation into the new Founders’ Relief.
Schedule 4 CSOP (Company Share Option Plan) schemes changes – Announced by the Chancellor as ‘EMI (Enterprise Management Incentives) 2’, the forthcoming changes will see the value of tax-advantaged options held under the scheme rise from £60k to £120k from 6 April 2027. The exercise period will be extended to 15 years, and the interaction with the EMI option limit will be removed. All changes are applicable from 6 April 2027.
Schedule 5 EMI (Enterprise Management Incentive) schemes change – Exercise window following a ‘disqualifying event’ such as a loss of independence will be extended from 90 days to 180 days. Also, the long-awaited removal of the need to make a notification to HMRC about newly granted EMI options will finally take place – any EMI grants made on or after 6 April 2027 will not need to be notified.
Business Asset Disposal relief – Probably as a result of the new Founders relief, the lifetime limit for gains under Business Asset Disposal relief (BADr) will be further reduced from £1m to £500k, meaning only the first £500k of lifetime gains will attract the lower rate of CGT (currently 18%, previously 10%).
BADr is the renamed and reduced Entrepreneur’s Relief, available on disposals of shares in a personal company, or on disposal of shares arising from exercise of an EMI option (in each case subject to additional qualifying criteria).
Self-assessment payments on account – Modernisation of payments on account for self-assessment returns. From April 2029, anyone already making payments on account will make smaller, more frequent payments to bring them more in line with employees on PAYE.
Savings and property income rates – There will be a 4% increase in savings and property income rates, but no changes to the basic earned income rate. This replaces the planned 2% increase that was due to take place in April 2027.
Venture capital schemes – Minor tweaks incoming, which represent some positive change. In the past, some investors have missed out on valuable Seed Enterprise Investment Scheme (SEIS) relief due to the requirement for all SEIS investment to be made before any Enterprise Investment Scheme (EIS) investment can be received. The shares requirement for EIS is now being tweaked to allow for SEIS, EIS and Venture Capital Trust (VCT) investments to be made on the same day without disturbing the intended relief.
HMRC
HMRC will be given new powers to collect lower-value debts directly from “those who can afford to pay but repeatedly fail to do so”. The current proposal is to collect affordable monthly instalments directly from the UK bank accounts of persistent defaulters with tax debts not in excess of £10,000 (including any interest and penalties).
Greater compliance effort from HMRC – There are plans to add an additional 670 compliance officers to the existing commitment to add 5,500 compliance officers by 2029/30. Also, there will be greater digital compliance targeting wealthier taxpayers.
Other taxes and duties
New zero rating for donated medicines – Previously, donated therapeutics have been treated for VAT purposes as if a supply has been made – so even if the medicines were donated for free, VAT would still be due on the full amount. With retrospective effect from 23 June 2026, any medicines donated to a clinical trial, or donated to patients for ongoing treatment after their participation in a clinical trial, will be zero-rated for VAT. This extends to any donations to the NHS for treatment of NHS patients, and also any donations made to the Early Access to Medicines Scheme. This is a very welcome move which should hopefully reduce unnecessary tax shrinkage during already very expensive clinical trials.
E-invoicing – VAT e-invoicing will be required from April 2029.
Ride-sharing apps – VAT will be applicable to full fares charged by ride-sharing apps such as Uber, not just their cut for introducing the driver to you.
Online marketplaces – Will now be responsible for the VAT compliance of anyone trading at or above the registration threshold.
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