The Pre-Notification Trap: How Life Science, Biotech and Med-Tech Companies Are Losing R&D Tax Credits

Pre-notification is now a mandatory legislative requirement for certain companies intending to claim R&D tax credits. Introduced as part of HMRC’s reforms to the R&D tax relief regime, the rule applies to companies that are first-time claimants or those that have not made a relevant R&D tax credit claim in the previous three accounting periods. Affected companies must notify HMRC of their intention to claim within six months of the end of the relevant accounting period.

If this deadline is missed, the outcome is absolute. The R&D tax credit claim is automatically invalid, regardless of the scale of qualifying scientific or technological work undertaken. Crucially, there is no appeal process. HMRC has no discretion to accept a late notification, even where the company has undertaken genuine, high-risk R&D or was unaware of the requirement. For life science, bio-tech and med-tech businesses, where early-stage R&D costs are often substantial, this can result in the permanent loss of significant relief.

Why Start-Ups Are Most At Risk

Early-stage life science, biotech and med-tech companies are particularly vulnerable to the pre-notification rules. In the early stages, founders are rightly focused on product or process development and technical problem-solving. These activities often involve high levels of scientific uncertainty and represent the most R&D-intensive phase of the company’s lifecycle.

R&D tax credits are usually considered after this first stage of development has been completed, for example, once proof of concept has been achieved. By this point, however, the most expensive and technically challenging R&D may already be behind the business. If pre-notification was not submitted on time, that historic expenditure is permanently excluded from a claim. While companies may still be able to claim for ongoing or future R&D, such as process scale-up activities or iterative improvements, the level of qualifying expenditure is often significantly lower than during the initial development phase.

No Second Chances: What We’re Seeing Across the Life Sciences Sector

LimestoneGrey’s Managing Director, Matthew Jones, comments:  In the past few weeks alone, we have spoken to several companies seeking R&D tax credit advice, only to have to inform them that substantial historic R&D costs could not be claimed because pre-notification was not submitted on time. Once the deadline passes, there is no route to appeal and no retrospective fix.

In many of these cases, businesses were working with accountants who do not offer specialist R&D tax credit services and, as a result, would not typically be equipped to advise on this highly specific legislative requirement.

This underlines the importance of engaging with an R&D tax credit advisor early in the R&D journey. At LimestoneGrey, we support companies from the outset, ensuring pre-notification obligations are met, helping to track qualifying activities and expenditure and providing ongoing guidance throughout the development lifecycle. Importantly, we do not charge additional fees for early engagement, allowing businesses to plan effectively and avoid falling into the pre-notification trap that is quietly costing UK innovators.