that R&D tax credits be extended through
* extension of relief to cover benefits in kind;
* relief on payments to self-employed individuals and high quality management talent at CEO and CSO level;
* removing the PAYE/NI limit on repayable credit;
* extension of the relief to rent costs and
* extension of the relief to cover IP costs.
UK R&D tax credits are currently restricted to direct staff costs,and the repayment is limited to the amount that the company has paid through the PAYE system: this discriminates against smaller companies which may only employ a handful of people, spending more on sub-contractors.
The report also recommends extending the applicability of the Enterprise Investment Scheme (EIS) and Venture Capital Trusts (VCTs) by, for example, extending their scope to cover larger SMEs (following the definitions used for R&D tax credits). It also recommends extending the EIS and VCT scope to cover shares acquired through shareholder to shareholder transactions.
To pull more pharmaceutical activity to the UK and to facilitate collaboration with SME biotechnology companies, the report recommends:
* allow tax relief on the capital contribution made by a large company investing in an SME biotechnology company (currently, investors will usually only get relief when they finally sell the investment);
* extend group/consortium relief to allow tax losses in the investee SME to be passed to the pharmaceutical development partner to be set against its taxable income reducing the required share ownership requirements (at the moment, the partner needs to own at least 75% to fully benefit from the SME losses) and
* encourage pharmaceutical companies to locate more activity in the UK through introduction of a royalty box tax incentive, similar to those in Benelux countries.
In Belgium, the patent box incentive results in an effective tax rate on royalties of 6.8% [see Tom Swinnen's post, "Tax incentives for R&D in Belgium" on IP Finance here]; this is the lowest rate in Europe, but is only available for royalties on patents resulting from Belgian R&D activities. However, with the Belgian R&D incentive which gives a monthly cashflow boost, this presently makes Belgium very attractive for R&D. The Netherlands, Luxembourg and Spain have all recently introduced similar (albeit less generous) incentives and the UK Treasury is actively considering whether the UK should introduce a royalty box incentive. This report from the BIA should only reinforce that consideration, before the UK's R&D tax relief is substantially used by larger companies to create foreign-owned - and foreign-taxed - patents."
Friday, 23 January 2009
Bioscience 2015 reviewed and refreshed
Anne Fairpo (an intellectual property taxation specialist with Wragge & Co and IP Tax blogmeister) brings news of the BioIndustry Association's Bioscience 2015 Review & Refresh document, which called yesterday for further tax (and other) incentives for biotechnology in the UK, noting that the original Bioscience 2015 vision (published in 2003) "looks somewhat over-optimistic". On tax in particular, the report recommends (Anne writes):