Research and Development (R&D) Tax Credits consultation

​Executive summary

In general, the ABPI believes that the Research and Development (R&D) Tax Credit Scheme has proved beneficial to the encouragement of pharmaceutical R&D in the UK and that the scheme has evolved positively in terms of efficiency and application during the course of its lifetime. We believe that future modification of the scheme should be incremental and major upheavals in the scheme avoided to ensure that beneficial aspects of the scheme that have been developed as described above are not lost or undermined.

However, we still believe that there are some elements of the scheme that would benefit from further refining and we welcome the opportunity to comment on questions posed by HM Treasury regarding possible changes to the scheme.

Our comments include the following:

  • We believe that, provided the benefits of the scheme are not diluted, movement of the scheme to an above the line mechanism for companies to accrue the benefits will achieve greater visibility of the benefits offered by the location of such R&D work in the UK to the decision makers involved in the prospective location of new R&D activity.
  • Review of the allocation of R&D tax credits is necessary to ensure that they encourage optimally both the instigation of contracted R&D activity and the location by contractors of this work in the UK.
  • Qualification for tax-relief for indirect activities is in some cases a significant item in credit received albeit requiring a significant degree of resource on the part of all involved in calculation and agreement of qualifying items. It should only be phased out if a commensurate adjustment is made to the level of general relief to compensate for any loss of such relief.
  • We welcome the proposed removal of the PAYE/CICS cap.#
  • We do not feel that any change is necessary to the current arrangements for designation as a ‘going concern’.
  • Although not specifically mentioned in the consultation, we maintain that non-cash elements of remuneration should qualify for relief under the R&D Tax Credit Scheme.
  • Again, although not specifically part of the current consultation, ABPI has consistently advocated review of the interpretation of ‘production’ for R&D Tax Credit purposes. We note the publication for comment of draft revised guidance on this and will comment on it in due course.

We believe that attention to these issues would enhance the already valuable contribution of the R&D Tax Credit scheme to encouragement of R&D activity in the UK and would help improve the attractiveness of the UK as a location to carry pharmaceutical out R&D.

Further information

Download the ABPI's full submission to the R&D Tax Credits consultation (PDF, 464KB)

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