UK Autumn Budget 2021 – Healthcare and Life Sciences insights

This article forms part of our wider Budget 2021 coverage including expert analysis of the tax aspects which can be found on our Budget Hub.

HLS is an important sector for the UK economy, and although the Autumn Budget did not contain significant immediate tax changes, there were important spending commitments made by the Government in terms of R&D which will certainly be welcomed by HLS businesses. In line with discussions from before, R&D tax reliefs will be reformed to support modern research methods; the rules will expand qualifying expenditure to include data and cloud costs, to more effectively capture the benefits of R&D funded by the reliefs through refocusing support towards innovation in the UK. This will not only support the next generation HLS businesses (e.g. HealthTech and MedTech businesses) but will also provide opportunities for the traditional HLS businesses which are inevitably investing in these new areas to digitalise their operating models.   

HLS multinationals with presence in low/no tax jurisdictions are likely to have been key targets of the Diverted Profits Tax (DPT) legislation since its introduction in 2015, and in this Budget, there was good news and bad news on DPT. The extension to the period in which taxpayers can amend their CT return to make transfer pricing adjustments (and avoid a DPT charge) and bringing DPT within the Mutual Agreement Procedure (MAP) framework will be very welcome. However, in addition, a new section in the legislation which allow HMRC to refuse issuing closure notices on CT returns until the DPT position is finalised will likely be controversial for many ongoing enquiries. This change to the legislation only seeks to highlight that the interaction between DPT review periods and open CT enquiries will continue to be a complex area which will depend on the specific facts and circumstances of each taxpayer.

More generally, all businesses regardless of sector will be looking closely at the impact of an increased rate of corporate tax to 25% from April 2023; the new legislation in relation to the notification of uncertain tax treatment by large businesses; and the abolition of cross border group relief for EEA-resident companies.

Not applicable to all, but one to watch is the proposed Online Sales Tax which has been mooted in this Budget and will be an important development going forwards. HMRC will continue to seek views on how this should be implemented, but it is certainly not going to go away.  Affected businesses should stay close to government consultations to shape the outcome.

Our full review of the all the most significant tax measures from yesterday's Budget can be found on our Budget pages.