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Could the UK Government be Quietly Pushing R&D Incentives Toward Industrial Policy Objectives?
The UK’s R&D tax relief system is designed to be sector-neutral. In principle, any company—whether in biotech, food production, engineering, construction, software, or consumer goods—can claim tax credits if they meet the statutory definition of R&D for tax purposes. Yet recent policy behaviour, HMRC compliance checking trends and industrial strategy priorities suggest that the practical reality may be shifting.
This article explores whether the UK is slowly leaning towards “picking winners”, how that aligns with HM Treasury’s Tax Support for Entrepreneurs: Call for Evidence and what the implications may be for businesses preparing R&D claims under the merged RDEC-style scheme.
1. The Call for Evidence: a push for strategic innovation
HM Treasury’s consultation Tax Support for Entrepreneurs: Call for Evidence focuses heavily on how tax supports founders, high-growth businesses and innovation-led scale-ups. Themes include:
Addressing gaps in scale-up capital.
Improving the environment for IP-heavy, high-growth sectors.
Strengthening the UK’s position in globally competitive technologies.
While the consultation doesn’t propose changes directly to the R&D scheme, it frames the future of UK innovation policy. This makes it an important signal for R&D claimants and their advisers.
2. Legally sector-neutral — but increasingly sector-shaped
UK R&D rules are unambiguous: qualifying R&D depends on scientific or technological advancement, not sector. Neither HMRC nor Treasury publicly endorse a sector-specific regime.
But neutrality in law does not always mean neutrality in practice.
Across policy documents and Parliamentary commentary, certain sectors repeatedly receive emphasis:
Life sciences.
AI and digitalAdvanced manufacturing.
Quantum technologies.
Net Zero, clean tech and energy transition.
Semiconductors and photonics.
This doesn’t change legislation. But it does reveal where government expects R&D incentives to deliver the greatest impact.
3. “Soft preference signals” — where practical policy suggests strategic direction
3.1 Budget announcements favour a narrow set of “strategic” technologies
UK budgets increasingly present targeted investment packages for specific industries. These sectors tend to be:
export-oriented
patent-heavy
aligned with long-term national productivity goals
compatible with venture and institutional investment
This creates a public narrative that certain types of R&D are more valuable to the UK’s economic strategy.
3.2 The Call for Evidence aligns with deep-tech funding ecosystems
Much of the consultation focuses on investor incentives (e.g. EIS, SEIS, EMI). These mechanisms disproportionately benefit:
deep techscience-led ventures
AI and next-generation digital platforms
manufacturing scale-ups and engineering innovation
Since these companies are more likely to generate high-value R&D claims, the investment discussion subtly shapes the future claimant profile of the merged RDEC-style scheme.
3.3 HMRC enquiry patterns reinforce the trend
Practitioners across the industry report:
Higher scrutiny in sectors such as food, FMCG (fast moving consumer goods), construction, lower-complexity software and routine process innovation.
Lower scrutiny in sectors aligned with industrial strategy—biotech, advanced engineering, clean tech, AI, and complex software.
This creates a credibility gradient: all sectors may claim R&D relief, but not all sectors are treated equally in practice.
3.4 The Additional Information Form (AIF) favours high-science narratives
The AIF requires claimants to articulate:
scientific/technical baselines
advance sought
technical uncertainties
systematic investigation
These are easier to express in laboratory-style or engineering-heavy environments. Practical innovation sectors—food, construction, FMCG, applied software—must invest more effort to “translate” their work into the technical framing HMRC expects.
4. How this intersects with the future of the R&D scheme
How might changes from the Call for Evidence feed into the R&D regime?
If Treasury intends to prioritise high-growth, IP-rich sectors, future R&D scheme reforms could deepen this direction.
Investor policy, capital incentives and industrial strategy could shift the landscape so that high-tech sectors generate a greater share of R&D claims.
Less exposture to compliance checks may continue to work in favour of claims from deep-tech environments.
The long-term outcome could be a system that remains sector-neutral in legislation but increasingly sector-directed in practice.
5. Risks of drifting into “strategic sector bias”
There is a number of risks associated with a move towards sector-directed claims:
Reduced innovation diversity if practical sectors feel excluded.
Compliance inequalities, where some industries must justify their R&D more heavily than others.
Potential disengagement from sectors that innovate differently but still significantly (e.g. food, construction, materials innovation).
Loss of regional impact, since priority sectors are often clustered in specific cities.
6. Benefits of a strategic approach
Taking a strategic focus can be positive—if applied transparently and without undermining other innovative sectors, therefore a balanced view is essential because some targeted focus can support:
national competitiveness
long-term economic transformation
IP retention in the UK
export-driven industrial growth
re-shoring of advanced manufacturing capacity
7. What businesses and advisers should do now
Strengthen AIF narratives to emphasise the technical challenge.
Position projects within broader recognised scientific/technical contexts.
Clearly define technological baselines—even in “lower-tech” sectors.
Monitor Treasury consultations closely for directional shifts.
Be prepared for tighter expectations around provision of evidence and identification of the qualifying R&D uncertainty.
If you have questions or need some R&D claim advice get in touch
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