What Cambridge biotech startups need from accountants

What to take away

What Cambridge biotech startups need from an accountant

The Cambridge cluster runs on a particular mix: small teams, long development timelines, grant income and investors who want tax reliefs before revenue exists. A general high street practice rarely meets that mix.

You need an accountant who reads a lab budget as comfortably as a profit and loss account. Someone who knows that a seed round may be structured around SEIS and EIS, that the first commercial milestone may be a licence rather than a sale, and that staff costs dominate the cost base.

Cambridge accountants who work with life sciences also understand the local ecosystem: the Cambridge Biomedical Campus, the Science Park, Babraham and the incubators around them. That matters when a grant funder or an investor asks for a forecast that fits the sector's timelines.

The practical test is whether your adviser can answer three questions on the first call. How will the share structure affect SEIS and EIS? What evidence will support an R&D claim? Which costs can be capitalised and which must be expensed?

If the answer is vague, keep looking. A directory listing is a starting point, not a decision, and our selection checklist sets out the checks worth making before you appoint anyone.

SEIS and EIS advance assurance for early funding

Advance assurance is HMRC's written confirmation that a proposed share issue should qualify for the Seed Enterprise Investment Scheme or the Enterprise Investment Scheme. It is not a legal requirement, but most serious investors will not subscribe without it.

The process starts before you issue shares. You describe the company, its trade, its share structure and how the money will be used, then submit the application with supporting documents. HMRC reviews it and either confirms the scheme should apply or asks questions.

The EIS route has its own application process, set out in HMRC's guidance on how to apply to use the Enterprise Investment Scheme. SEIS follows a parallel path with lower investment limits and a higher rate of relief for the investor.

Timing is where startups lose ground. If you issue shares first and seek assurance later, you may have to unwind the round or lose the relief. Good advisers build the assurance application into the funding timetable.

Common trip hazards include non-qualifying trades, subsidiaries that hold intellectual property, loans that convert into shares, and founders who take payment before the qualifying period. Each one can be fixed, but only if it is spotted early.

R&D tax credit claims for life sciences companies

R&D tax relief is the single largest cash flow lever for most Cambridge biotech startups. It rewards companies that try to resolve scientific or technological uncertainty, which is most of what a life sciences lab does.

The rules changed. The old SME and large company split has been replaced by a merged scheme, with a separate enhanced intensive rate for research-intensive companies. HMRC's guidance on Research and Development tax relief explains who can claim and how the relief is calculated.

For a biotech startup, the claim is only as strong as the evidence behind it. You need contemporaneous records: lab notebooks, project plans, trial results, time records and technical reports that show what was uncertain and how you tried to resolve it.

Accountants who specialise in life sciences will often work with a technical writer or your own scientists to draft the project descriptions. That division of labour keeps the tax adviser focused on the numbers and the scientists focused on the science.

Watch the interaction with grant funding. Some grants are notified state aid and restrict what you can claim on the same project, while others are not. Getting this wrong is one of the most common reasons a claim is reduced.

Loss-making companies can surrender the loss for a payable credit, which is often the first meaningful cash the business sees. That credit is taxable in some circumstances, so the modelling should cover both the claim and its tax treatment.

Specialist knowledge: grants, IP and share schemes

Grant income is normal in Cambridge biotech, from Innovate UK and UKRI through to charitable and European sources. Each grant has its own accounting treatment, its own audit expectations and its own effect on your R&D claim.

Intellectual property is the other half of the balance sheet. Patent box relief can reduce the tax rate on profits from patented inventions, but only if the company holds or exclusively licenses the patent and meets the development condition.

Share schemes matter earlier than founders expect. EMI options are common for early hires, and the valuation agreed with HMRC shapes the tax outcome for years. A share scheme that is set up casually can cost a lot to unpick.

A specialist adviser will also keep an eye on the wider compliance calendar. Company Tax Returns, confirmation statements and, where relevant, Making Tax Digital records all sit alongside the tax relief work, and the filing rules for Company Tax Returns are worth reading before your first deadline.

Professional bodies provide the technical backbone. ICAEW's technical tax guidance is a useful check on how a relief is meant to operate, and membership of ICAEW, ACCA, CIOT or AAT tells you the adviser is subject to a recognised ethical and CPD framework.

Choosing and onboarding a Cambridge accountant

Start with sector evidence, not price. Ask how many life sciences clients the firm acts for, whether it has handled advance assurance before, and who in the team writes the R&D reports.

Then look at the shape of the firm. A Cambridge practice with a tax specialist, an audit capability for grant work and a bookkeeping team that understands project codes will save you more than a cheaper generalist.

Our five firms compared piece shows how to read a provider's offer, and the market entry checklist is useful if you are assessing how a firm is set up to take on regulated work.

It also helps to know what the profession is preparing for. Our skills forecast covers the technical judgement and data skills that firms will need, which is a fair question to put to any adviser you interview.

Use this checklist before you sign an engagement letter.

Onboarding is mostly an administrative exercise, and it goes faster if you prepare a pack in advance. Include the certificate of incorporation, articles, cap table, all grant agreements, prior accounts and tax returns, R&D project notes and details of any share options.

Agree who does what. The founder or finance lead keeps the records current, the accountant prepares the filings, and the technical team supplies the science. Put a monthly call in the diary during your first year.

Finally, treat the relationship as a two-way flow of information. Tax reliefs for biotech depend on facts that change quickly, such as a new grant, a patent filing or a first hire on options. Tell your accountant when they happen, not at year end.

Common questions