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R&D tax credits for MedTech companies

Medical Technology (MedTech) is one of the largest, growing industries in the UK as the sector looks to bridge the gap between traditional diagnostics to harnessing the power and insight that can be gained through technology.

MedTech goes wider and deeper than diagnostics reaching into most parts of the medical world. The Thames Valley in particular is a hotbed of activity due to the concentration of leading universities and specialist companies focused solely on development. It is a sector that ranks highly as a beneficiary of R&D tax relief. R&D is in the very fabric of the industry.

At the most basic level, for R&D tax purposes, development needs to satisfy two core tests:

  • An advance in science or technology
  • Scientific or technological uncertainty

A typical claim is likely to include:

  • Software development
  • Hardware and resolving how that hardware interacts with software for the intended use
  • Creating efficiency in a process
  • Greater ability for analysis
  • Reducing surgical and recovery time

If you are involved in the MedTech world, or connected in some way to it, it is very likely that you will be in scope for R&D tax relief and also worth considering potential opportunities for Patent Box.

What qualifies for MedTech R&D?

Using a broad categorisation, there are five areas which R&D claims apply to in MedTech; staff costs, subcontractors, externally provided works (EPWs), consumables and heat, light and power. You can find out more about how we use this data throughout your R&D tax claim below:

The majority of most R&D tax relief claims are based around staff costs. This includes people directly involved with the activity and others who are indirectly involved.

An example of direct costs would be a specific solutions architect – they tend to be defined, technical roles who are the doers of the project. A common misconception is they have to be scientists and academics, this is incorrect. If they are a competent professional whose expertise is part of the R&D effort, then they should be included.

Indirect staff are people who are also involved in supporting the R&D project such as management, procurement, control functions, where they help enable the R&D to happen and also are part of the management of the process. These costs are usually overlooked and can be a big impact on the claim.

Where you may not have the expertise in house, you may rely on a third party to help with part of the R&D process. These claims are qualifying expenses for the R&D tax relief scheme.

Like subcontractors, you may not have directly employed staff but want to have resource for a particular role who act in the same way as employees – i.e. under your care custody and control. These costs form part of the claim.

Any items that are used only for R&D and have no use once the project is completed so consumed by the project is also qualifying expenditure.

When you know how much R&D you are doing, you can then attribute a proportion of your heat, light, power & water to the R&D tax relief claim.

Typical scenarios

Muscle slicing for analysis

A client is a leader in the field of muscular analysis which helps create a cure plan and preventative measures to avoid repeat injury. Part of this process was the removal or reconstruction of muscle of tissue. Doctors wanted to understand how the muscle damage had changed or remained injured post death. Products in the market were able to slice the muscle but our client wanted to go even thinner to see if it would give any greater detail. They set about developing a new way of freezing and then slicing the muscle down to a thinness that had never been done before. This project continues but is a clear example of how growing technology on other sectors could potentially be used to create an advance in medicine.

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