Develop Best Practice & Policy
Provide recommendations based on expert advice on investment, fiscal & corporate governance, grant funding, taxation and HMRC guidance affecting R&D SMEs.
Consult, Advocate & Inform
Liaison with members to canvass collective opinions and represent to Government and other relevant parties, often in collaboration with other life sciences member organisations. Feed back to membership on actions and progress.
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After months of ‘testing the water’ with various leaks of what might be to come, Rachel Reeves finally gave her second Budget speech on Wednesday 26 November (only shortly after the Budget was leaked by the Office of Budget Responsibility). So, after all the speculation, what changes were made that are important for the life sciences sector?
If we put aside any questions about whether the Budget has been costed out fully (allocating £10bn of receipts from tackling tax fraud is questionable, given that, by definition, this is an unknown quantum – we haven’t heard of any fraudulent activities being declared in tax returns), we can take some positives for the sector from this Budget.
Tax Support for Entrepreneurs
Behind the scenes on Budget Day, the Government published a Call for Evidence to discuss ways that the tax system can support start-ups and scale ups. It recognised the strength of the UK’s opportunities, with 10 of the top 20 universities across Europe for spin-outs. The call for evidence will look at a number of reliefs that may be introduced or improved to better support high growth companies.
A number of ‘scale-up friendly’ measures were also made in the Budget.
Extension of EIS
From 6 April 2026, the lifetime company investment limit under the enterprise investment scheme (“EIS”) will increase to £24 million (£40 million for knowledge intensive companies (“KICs”)), and the annual company investment limit will increase to £10 million (£20 million for KICs). The size of a company that can benefit from EIS will also increase, with the gross assets test increasing from £15 million to £30 million before the share issue, and from £16 million to £35 million immediately after the issue of shares. This is a huge support to companies in the sector, whose capital requirements are significantly higher than in other sectors.
There will be a reduction in income tax relief for VCTs from 30% to 20%, which will again be effective from April 2026. The Government states that this is designed to balance the amount of upfront tax relief compared to EIS, which does not offer dividend relief, and incentivise funds to seek out higher returns.
Extension of EMI
Enterprise Management Incentives (“EMI”) options were already the most tax efficient way to incentivise employees, but the Budget has improved the EMI scheme by extending a number of the limits. The limits extended are: the size of the company that can participate (increasing the gross asset limit from £30m to £120m and the employee limit from 250 to 500 employees), the value of unexercised options in a company from £3m to £6m (the value is assessed on the date the option is granted), and extending the EMI period from 10 years to 15 years. The limits will apply from 6 April 2026. Existing scheme rules will be permitted to be amended to allow for the increase in the option period from 10 to 15 years without triggering any deemed surrender treatment.
One requirement of EMI that is failed more than any other is the requirement to notify the grant of an option. The period to notify was extended from 92 days to align with the filing date of the annual return (6 July following the tax year of grant) in 2024, but the Budget announced that this requirement will be scrapped altogether in Finance Bill 26/27. We don’t know why this change is being made so far in the future, but it is certainly a positive one. (NB. Companies will still be required to report EMI option grants via the mandatory annual return).
Stamp Duty Reserve Tax
The fact that a number of businesses often choose to list overseas rather than stay in the UK was also acknowledged. To address this, the Budget announced that Stamp Duty Reserve Tax has been removed on agreements to transfer securities of a company whose shares are newly listed on a UK regulated market. The exemption will apply for a 3-year period from the listing of the company’s shares. Once in the post-listing period, the exemption will apply to all of the company’s securities (not just shares). Whilst this is a welcome change, it seems unlikely that this will lead to an increase in UK listings.
Tax Increases
There were a number of tax increases including against pension and savings income. However, of most significance to the sector is the increase in the dividend tax rate. This is likely to negatively impact investment as it reduces the returns available to investors. It will be interesting to see if there is any U-turn on this following the conclusions of the call for evidence mentioned above as this is not scale-up friendly.
Shawn has over 30 years of working as part of, or alongside, the life Science industry. Originally an epidemiologist, he started his commercial career as a consultant to the pharmaceutical industry, assisting with global product and portfolio development projects across a wide range of indications, transitioning to the City of London where he spent over 12 years as a rated analyst, broker and adviser to the European Life Science industry. Over his career he has assisted in raising over $1bn of funding. He is currently a strategic and financial advisor to the industry, with assignments spanning a broad range of corporate and commercial development activities, including both transactions and broader corporate strategy.
Stuart joined the OBN Board in May 2022 with over 35 years’ experience in the life science arena. After graduating in biological sciences he started his career in pharmaceutical sales before moving into international marketing in consumer healthcare and prescription medicines.
His career spans global pharma companies, a university spin-out, mid-cap biopharma, privately-owned SMEs, strategic consulting, advising PE & VC investors and leadership of a not-for-profit organisation. Prior to joining OBN he was Managing Director for Merz Pharma UK, building the business up to be one of the top 3 performing affiliates worldwide.
Stuart has also supported life sciences through roles including a Steering Group member for the Ethical Medicines Industry Group, the ABPI Small Companies Forum and a decade serving on the Prescription Medicines Code of Practice Authority Appeal Board. He is passionate about mentoring new talent and enjoys DIY, high-handicap golf and wine.
Matthew is a founding partner at Longwall Ventures based at Harwell. He has a D.Phil in Biochemistry from the University of Oxford. His pre-venture experience ranges from working in clinical pathology to virology with Zeneca and drug development with Neures. Matthew began venture investing in 1999 and has worked with several investee companies either as an interim manager or board director.
Kathy is a tax partner at Penningtons Manches Cooper LLP. Kathy’s clients are made up predominantly of growth companies, with a significant proportion in the life sciences sector. For these clients, Kathy advises on tax efficient investments, employment status for tax purposes, incentivising employees and structuring for an exit. Kathy has recently been involved with the Worked Example Group to agree a worked example valuation for growth companies issuing shares to employees, which will shortly appear in HMRC’s valuation manual.
Helen is Chief Business Officer at Evgen Pharma plc. She has over 20 years’ experience in scientific and business roles for both public and private R&D-based biotechnology companies as well as in government funding and equity investment. She was previously Vice-President of Corporate Development at Chronos Therapeutics Ltd and while at Innovate UK, she created and delivered the £180m Biomedical Catalyst competitive grant scheme funded by the UK government. Helen holds a PhD in physiology and pharmacology from the University of Leicester, UK.
Graham is a partner and head of Tax and Incentives at the international law firm Taylor Wessing. He is an international tax specialist who advises domestic and multinational clients on a wide range of transactional and advisory tax matters. He guides clients through stock and asset/business acquisitions and disposals, crossborder tax structuring, UK inbound and outbound investment, joint ventures and reorganisations. He also advises on tax issues relating to the development, ownership and exploitation of intellectual property rights, with a particular focus on the life science and technology sectors.
Howard has been CFO of Safeguard Biosystems since 2006. His previous career was fairly evenly split between investment banking (primarily with Charterhouse Bank) and providing corporate consultancy services. He has spent much of his career working with early-stage companies and also has a rich knowledge of corporate finance and recovery transactions. Safeguard Biosystems currently aspires to secure FDA approval for its revolutionary diagnostic solutions.
