4. Financial statements

Statement of comprehensive net expenditure for the year ended 31 March 2026

The notes on pages 78 to 92 form part of these accounts.

Statement of financial position as at 31 March 2026

The notes on pages 78 to 92 form part of these accounts.

The financial statements on pages 74 to 77 were signed on behalf of the Health Research Authority by:

Statement of cash flows for the year ended 31 March 2026

The notes on pages 78 to 92 form part of these accounts.

Statement of changes in taxpayers’ equity for the year ended 31 March 2026

The notes on pages 78 to 92 form part of these accounts.

Notes to the accounts

1. Accounting policies

These financial statements have been prepared in line with directions given by the Secretary of State, under the Care Act 2014 and in accordance with the Government Financial Reporting Manual (FReM) issued by HM Treasury. The accounting policies contained in the FReM apply International Financial Reporting Standards (IFRS) as adapted or interpreted for the public sector context. Where the FReM permits a choice of accounting policy, we have selected the accounting policy which is considered the most appropriate for our circumstances to give a true and fair view. The policies we have adopted are described below and have been applied consistently for items considered material in relation to the accounts.

1.1 Going concern

The Department of Health and Social Care (DHSC) has confirmed our funding will continue and next year’s funding has been agreed. There is a strong presumption for the continued provision of our services as set out in the Care Act 2014 for a minimum timeframe of 12 months from the date the annual accounts are authorised. We consider it appropriate to prepare the 2025-26 financial statements on a going concern basis.

1.2 Accounting conventions

These financial statements are prepared under the historical cost convention, modified by the revaluation of certain assets and liabilities as determined by the relevant accounting standards, and subject to the interpretations and adaptations of those standards in the UK Government Financial Reporting Manual.

1.3 Revenue

Operating revenue is revenue which relates directly to our operating activities. Our main revenue comprises fees and charges for services provided to the devolved administrations, as well as revenue from the government’s non-cash apprenticeship fund and other NHS and non-NHS organisations. Where revenue is derived from contracts with customers, it is accounted for under IFRS 15. We recognise our devolved administrations revenue as a single performance obligation where the service is delivered over the financial year, and recognise the revenue over the same period. For all other revenue this is recognised when (or as) performance obligations are met and is measured at the transaction price allocated to the performance obligation.

The FReM expands the definition of a contract to include legislation and regulations which enable an entity to receive cash or another financial asset that is not classified as a tax by the Office of National Statistics (ONS). Revenue generated for services provided is recognised when (or as) performance obligations are met and is measured at the transaction price allocated to the performance obligation. Where revenue received or receivable relates to a performance obligation that is to be met in a future period, the income is deferred and recognised as a contract liability.

We access funds from the Government’s apprenticeship service and recognise this benefit as revenue in accordance with IAS 20, Accounting for Government Grants. Where these funds are paid directly to an accredited training provider, non-cash revenue and a corresponding non-cash training expense are recognised, both equal to the cost of the training funded.

1.4 Taxation

The HRA is not liable to pay corporation tax. Expenditure is shown net of recoverable VAT. Irrecoverable VAT is charged to the most appropriate expenditure heading or capitalised if it relates to an asset.

1.5 Tangible assets – property, plant and equipment

(a) Recognition

Tangible assets which can be used for more than one year are capitalised when:

• individually have a cost equal to or greater than £5,000; or
• collectively have a cost of at least £5,000 and an individual cost of more than

£250, where assets are functionally interdependent, they have broadly simultaneous purchase dates, are anticipated to have simultaneous disposal dates and are under single managerial control

(b) Valuation

Tangible assets are capitalised initially at cost. They are carried on the Statement of Financial Position at cost net of depreciation and impairment or at depreciated replacement cost where materially different.

(c) Impairment

All assets, including those not yet in use, are reviewed annually to consider any changes in their economic life or any indications of impairment. If there is an indication of an impairment, the recoverable amount is estimated to determine whether there has been a loss and, if so, its amount. Impairment losses that arise from a clear consumption of economic benefits or of service potential in the asset are charged to the operating expenses.

(d) Depreciation

All tangible assets are depreciated over their useful economic life. The expected useful life of furniture and fittings assets can vary depending on the length of the lease of the building and so are depreciated over different economic lives as follows:

(e) Assets under construction

Assets are held under construction where tangible information technology and furniture and fittings are not yet in use.

Personal computers are recognised in assets in use when they are received.

1.6 Intangible Assets

(a) Recognition

Intangible assets are non-monetary assets without physical substance. They are recognised only when it is probable that future economic benefits will flow to, or operational capacity will be provided to us; where the cost of the asset can be measured reliably; and where the cost is at least £5,000.

(b) Valuation

All intangible assets are initially recognised at cost from the date when the criteria for recognition are initially met. Following initial recognition intangible assets are carried at cost net of amortisation and impairment.

(c) Amortisation

All intangible assets, except for those under construction, are amortised over their expected useful economic life. Amortisation is charged on each individual component of intangible assets. Intangible assets comprise of our research legacy systems and the hardware licence fee for those systems. Development expenditure for our legacy systems is grouped under information technology. The estimated lives of these assets have been assessed and are set out below. They are amortised on a straight-line basis over the estimated life of the asset. Purchased computer software licences are amortised over the shorter of the term of the licence and their useful economic lives.

(a) Assets under construction

Assets are held under construction where development work has been undertaken but further work is required to bring assets into use.

(b) Impairment

All assets, including those not in use, are subject to an annual impairment review. If there is an indication of an impairment, the recoverable amount is estimated to determine whether there has been a loss and, if so, it’s amount. Impairment losses that arise from a clear consumption of economic benefits or of service potential in the asset are charged to the operating expenses.

1.7 Significant accounting policies and material judgements

We review estimates and underlying assumptions annually based on historical experience and other relevant factors. Revisions to accounting estimates are recognised in the period of the revision and future periods if the revision affects both current and future periods.

Work to design and build our new digital service, Plan and Manage Health and Care Research has continued during the year, using Agile methodology with a delivery partner. Costs incurred in the programme have included both external costs paid to our delivery partner and internal costs for staff working on the programme. The programme involves both capital and revenue activities.

Delivery partner costs have been apportioned between capital and revenue by determining the nature of the work using IAS 38 for each work cycle. Activities have been assessed as capital where they are directly attributable to preparing the asset.

Internal staff costs have been allocated to capital for staff who have worked solely on capital activities within the programme during the financial year. Internal staff costs for staff who have worked solely on revenue activities have been allocated to revenue. Internal staff costs for staff who work across both capital activities and revenue activities have been apportioned across both capital and revenue. The methodology applied is based on work activity data captured in a key system managing the programme delivery. The work activity data for staff involved in the programme is converted into workdays for each staff member individually and allocated between capital and revenue based on whether the work directly contributes towards bringing the asset into use. The allocation is completed every three months, for each staff member.

1.8 Cash and cash equivalents

Cash is the balance held with the Government Banking Service. We do not hold any petty cash.

1.9 Employee benefits

Short-term employee benefits

Salaries, wages and employment related payments are recognised in the year in which the service is received from staff. The cost of leave earned but not taken by staff at the end of the year is recognised in the financial statements to the extent that staff can carry forward leave into the following year and staff records support this.

Retirement benefit costs

Past and present employees are covered by the provisions of the 2 NHS pension schemes. The schemes are unfunded, defined benefit schemes that cover NHS employers, General Practices and other bodies, allowed under the direction of the Secretary of State, in England and Wales. The schemes are not designed to be run in a way that would enable NHS bodies to identify their share of the underlying scheme assets and liabilities. Therefore, the schemes are accounted for as though they were defined contribution schemes: the cost to our organisation of participating in a scheme is taken as equal to the contributions payable to the scheme for the accounting period. The contributions are charged to our operating expenses as they become due. For early retirements other than those due to ill health the additional pension liabilities are not funded by the scheme. The full amount of the liability for the additional costs is charged to the expenditure at the time we commit to the retirement, regardless of the method of payment. The schemes are subject to a full actuarial valuation every four years and an accounting valuation every year.

1.10 Leases

A lease is a contract or part of a contract that gives the right to use an asset for a period in exchange for consideration. For public sector organisations, in line with HM Treasury guidance, this includes lease-like arrangements with other public bodies.

We determine the term of the lease term with reference to the non-cancellable period and any options to extend or terminate the lease which we are reasonably certain to exercise.

Initial recognition and measurement

At the commencement date of the lease, being when the asset is made available for use, we recognise a right of use asset and a lease liability. The right of use asset is recognised at cost comprising the lease liability, any lease payments made before or at commencement, any direct costs incurred by the lessee, less any cash lease incentives received. We include any estimate of costs to be incurred restoring the site or underlying asset on completion of the lease term where these are readily available and reasonably certain to be exercised. The lease liability is initially measured at the present value of future lease payments discounted at the interest rate implicit in the lease. Lease payments includes fixed lease payments, variable lease payments dependent on an index or rate and amounts payable under residual value guarantees. It also includes amounts payable for termination penalties where these options are reasonably certain to be exercised. Where an implicit rate cannot be readily determined, we apply an incremental borrowing rate. This rate is determined by HM Treasury annually for each calendar year. A nominal rate of 4.81% applied to new leases and lease modifications commencing in the 2025 calendar year and 5.32% for new leases in the 2026 calendar year.

We do not apply the above recognition requirements to leases with a term of 12 months or less, or to leases where the value of the underlying asset is below £5,000, excluding any irrecoverable VAT. Lease payments associated with these leases are expensed on a straight-line basis over the lease term. Irrecoverable VAT on lease payments is expensed as it falls due.

Subsequent measurement

Our right of use assets consist of property leases for office space. We use the cost model for subsequent measurement of our right of use assets. We consider this an appropriate proxy for the current value due to either the duration of the leases or the terms of the leases having periodic market based rent reviews included. The liability is remeasured for changes in assessments impacting the lease term, lease modifications or to reflect actual changes in lease payments. Such remeasurements are also reflected in the cost of the right of use asset. Where there is a change in the lease term, an updated discount rate is applied to the remaining lease payments. We subsequently measure the lease liability by increasing the carrying amount for interest arising which is also charged to expenditure as a finance cost and reducing the carrying amount for lease payments made.

Operating leases as the lessor

Rental income from operating leases is recognised as income on a straight-line basis over the term of the lease.

1.11 Financial instruments

Financial assets and financial liabilities recognition

Financial assets and financial liabilities arise where the HRA is party to the contractual provisions of a financial instrument, and as a result has a legal right to receive, or a legal obligation to pay, cash or another financial instrument. This definition of a contract includes legislation and regulations which give rise to arrangements that in all other respects would be a financial instrument and do not give rise to transactions classified as tax by Office for National Statistics. This includes the purchase or sale of non-financial terms, such as goods and services, which are entered into in accordance with our normal requirements and are recognised when, and to the extent which, performance occurs. This means when receipt or delivery of the goods or services is made. Our receivables comprise cash at bank, NHS and non-NHS receivables, prepayments, accrued income and other receivables. Our financial liabilities comprise: NHS Payables, other payables and accruals.

1.11.1 Classification and measurement

After initial recognition, financial assets and financial liabilities are measured at amortised cost. These are assets and liabilities which are held with the objective of collecting contractual cash flows and where cash flows are solely payments of principal and interest. This includes cash equivalents, contract and other receivables, trade and other payables and rights and obligations under lease arrangements.

1.11.2 Impairment of financial assets

For all financial assets measured at amortised cost including lease receivables, contract receivables and contract assets the Health Research Authority recognises an allowance for expected credit losses. We adopt the simplified approach to impairment for contract and other receivables, contract assets and lease receivables, measuring expected losses as at an amount equal to lifetime expected losses.

1.11.3 De-recognition

Financial assets are de-recognised when the contractual rights to receive cash flows from the assets have expired or we have transferred substantially all the risks and rewards of ownership. Financial liabilities are de-recognised when the obligation is discharged, cancelled or expires.

1.12 Insurance Contracts

IFRS17 Insurance Contracts has replaced IFRS4 Insurance Contracts and is effective for periods beginning on or after 1 April 2025. An insurance contract is a contract under which the issuer accepts significant insurance risk from the policyholder by agreeing to compensate the policyholder if a specified uncertain future event adversely affects the policyholder. In applying the Standard we have not identified any contracts that meet the definition of an Insurance Contract.

1.13 IFRS disclosure

IFRS’s amendments and interpretations in issue but not yet effective or adopted

The following is a list of changes to IFRS that have been issued but which were not effective in the reporting year.

IFRS18 Presentation and Disclosure in Financial Statements

IFRS18 was issued in April 2024 and applies to periods beginning on or after 1 January 2027. The standard has not yet been adopted by FRAB for inclusion within the FReM and therefore it is not yet possible to confirm how this will impact on our accounts in the future.

IFRS19 Subsidiaries without Public Accountability Disclosures

The Standard is effective for accounting periods beginning on or after 1 January 2027. The Standard is not yet UK-endorses and not yet adopted by the FReM. Early adoption is not permitted. This will not impact on our accounts in the future.

2 Analysis of net expenditure by segment

We report financial information to the Board as 1 segment and therefore no segmental analysis is disclosed.

3 Staff numbers and related costs

Tables for staff numbers, costs and other related costs are included on page 57 within the remuneration and staff report and also included within note 4 of the accounts.

4 Expenditure

All our costs are administration costs:

(1)Premises costs have been restated in 2024-25 to separately disclose IT infrastructure costs relating to digital services, which were previously included within the premises expenditure.

(2)The HRA did not make any payments to external auditors for non-audit work. The audit fee reported at the year ended 31 March 2026 includes an additional fee of £9,500 relating to the 2024-25 audit, which was notified to the HRA during 2025-26. (2024-25: £4,000)

5 Operating revenue

6 Non-current assets

6.1 Tangible assets – property, plant and equipment 2025-26

(1) Disposals in the year include servers which had been fully depreciated and were no longer in use. Faulty models of older laptops were also disposed during the year and replaced with newer models. These laptops were fully depreciated.

6.1 Tangible assets – property, plant and equipment 2024-25

(1) Disposals in year consist of faulty models of older laptops that were returned and replaced with newer models, with a small amount of accelerated depreciation (£1k) being charged in year to recognise the decrease in their useful life.

6.2 Intangible assets 2025-26

The asset under construction expenditure relates to the construction of our new digital service, Plan and Manage Health and Care Research. The value of staff costs capitalised within the asset under construction additions is £2,818k (2024-25: £308k)

6.3 Intangible assets 2024-25

The asset under construction expenditure relates to the construction of the Plan and Manage Health and Care Research digital system The value of staff costs capitalised within the asset under construction additions is £308k (2023-24: £191k)

7 Right of use assets

7.1 Right of use assets 2025-26

Our London office lease at Redman Place and our Manchester office lease at Piccadilly Place are recognised as right of use assets under IFRS 16 and included within the note above. We reduced the space we occupy within our London office this year resulting in a decrease in our lease liability. This is disclosed within the lease liability remeasurements line and disposals/derecognition line of the note above. The additions line relates to our Manchester office at Piccadilly Place.

Our Newcastle office agreement at Newcastle Blood Centre is treated as a service agreement as the lessors have substantive substitution rights and we do not have an identified assets or the right to direct the use of an asset in the period of use. The cost of this arrangement is included within the statement of comprehensive net expenditure and future commitments related to this service agreements has been included in Note 12. During the year we vacated our Nottingham office at Equinox House and moved to Seaton House where we can use a small number of desks from another Non Departmental Public Body (NDPB) as and when required. For Seaton House there is no identified right of use asset and nil consideration and therefore no disclosure required.

7.2 Right of use assets 2024-25 p88

Our London office lease at Redman Place and our Manchester office lease at Piccadilly Place 4th floor which was an addition in the year are recognised as right of use assets under IFRS 16 and included within the note above. Our London office had a rent review in year and the resulting increase has been included within the remeasurements of the lease liability line of the note above. Our Manchester office lease at Piccadilly Place 3rd floor was terminated in year as planned and the relevant entries are disclosed within the disposals / derecognition lines of the note above.

Our Newcastle office agreement at Newcastle Blood Centre and our Nottingham office agreement at Equinox House are treated as service agreements as the lessors have substantive substitution rights and we do not have an identified asst or the right to direct the use of an asset in the period of use. The cost of these arrangements is included within the statement of comprehensive net expenditure. Future commitments related to these service agreements have been included in Note 12.

7.3 Reconciliation of the carrying value of lease liabilities p89

Lease payments for short term leases, leases of low value assets and variable lease payments not dependent on an index or rate are included in operating expenditure. These payments are included in Note 4. Cash outflows in respect of leases recognised on the Statement of Financial Position are disclosed in the reconciliation above.

No income was generated from subleasing right of use assets in 2025-26 (2024-25:

£nil).

7.4 Maturity analysis of future lease payments at 31 March 2026

8 Trade and other receivables

9 Cash and cash equivalents

10 Trade payables and other current liabilities

11 Capital commitments

At 31 March 2026, we had £493,223 capital commitments (31 March 2025: £345,705) relating to the Plan and Manage Health and Care Research digital system.

12 Other financial commitments

We have entered into non-cancellable contracts for which we have a financial commitment. These include our office accommodation in Newcastle, the contract for the provision of finance and accounting services, contracts to support our research systems and deliver the research systems programme, licensing and other services.

13 Commitments under leases

Operating lease income

On 1 July 2025 we entered into an arrangement with the Care Quality Commission (CQC) to share our Newcastle office space.

14 Losses and special payments

Losses and special payments are reported on page 65 in the parliamentary accountability and audit report section of the annual report.

15 Related party transactions

The HRA is a non-departmental public body (NDPB) established by the Secretary of State for Health and Social Care. The Department of Health and Social Care (DHSC) is regarded as a controlling related party. During the year we had a significant number of material transactions with DHSC and with other entities for which DHSC is regarded as the parent Department.

We also had transactions with other government departments and other central government bodies. Most of these transactions have been with HMRC for social security costs and the NHS Pension Scheme for our pension costs. No Board members as identified within the Remuneration report, key managers or other related party has undertaken any material transactions with the HRA during the year.

16 Financial instruments

Financial risk management

Financial reporting standard IFRS7 requires disclosure of the role that financial instruments have had during the year in creating or changing the risks a body faces in undertaking its activities. As our cash requirements are met through Parliamentary funding, financial instruments play a more limited role in creating risk that would apply to a non-public sector body.

Most financial instruments relate to contracts to buy non-financial items in line with our expected purchase and usage requirements and consequently we are exposed to little credit, liquidity or market risk.

Financial assets

We operate primarily within the NHS market and receive most of our income from DHSC and the devolved administrations. IFRS9 requires us to adopt a lifetime credit loss model for our financial assets.

We have applied this model to our trade receivables (excluding NHS receivables) and assessed our credit loss value as at 31 March 2026 to be £12,661 (31 March 2025: £237).

Financial liabilities

We operate within both the NHS and non-NHS market for the supplies of goods and services. Our financial liabilities mainly consist of short-term trade creditors and accruals relating to the purchase of non-financial items. The exposure to financial liability risk is minimal.

The aged creditor report for the NHS and non-NHS payables at the reporting date was:

17 Contingent Liabilities

On 14 November 2025 the HRA were notified of a judicial review application being made against them regarding a clinical trial that was approved in the financial year. The HRA has engaged external legal advisors to support in this matter. The hearing for this case is expected to take place during 2026-27 financial year. The likelihood of any liability arising from this case and its timing remains very much uncertain.

18 Events after the reporting period

The Accounting Officer authorised these financial statements for issue on the date the Comptroller and Auditor General signed the audit certificate. There are no events after the reporting date to report.