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Life science 'patent box' retained in budget

The Office for Life Sciences' 'patent box' is to be retained, as announced by the Chancellor in this week's emergency UK budget

The Office for Life Sciences' 'patent box' is to be retained, as announced by Chancellor George Osborne in this week's emergency UK budget.

The patent box, which was introduced by former Chancellor Alastair Darling in December 2009 proposed introducing a 10 per cent corporation tax rate on income derived from patents held in the UK, compared to a main corporation tax rate of 28 per cent, with the hope of encouraging research and development within the UK from the pharmaceutical and biotech industries.

The news was welcomed by the Association of the British Pharmaceutical Industry's (ABPI) director general, Dr Richard Barker: "We are delighted that the Chancellor has decided to retain this important initiative as we believe it will make a significant contribution to the UK's ability to retain its world-leading position in an increasingly competitive global environment."

As well as the retention of the 'patent box', the ABPI were encouraged by the reduction in corporation tax (from 28 per cent to 24 per cent over the course of four financial years from April 2011) announced in the budget, suggesting it will allow the UK to compete with other countries who offer lower rates, with particular regards to pharmaceutical manufacturing.

There was also positive reaction from the organisation for the announcement to cut small profit tax rates from 21 per cent to 20 per cent to stimulate smaller businesses.

There were more mixed feelings for the budget from the BioIndustry Association (BIA), who said in a statement: "[The budget] falls short of helping to develop an economy based on innovative business such as those in the UK's bioscience sector."

The organisation, which represents the UK's bioscience industry, criticised the increase in capital gains tax for higher rate tax payers, warning it will "dis-incentivise investment in the small- and medium-sized enterprises that will drive the future growth of the UK economy".

Nigel Gaymond, chief executive of the BIA, said: "On the surface of it, this is a missed opportunity from a coalition government that spoke strongly about an innovation driven economy prior to the election.”

The BIA were however "encouraged" by the Chancellor's decision to consult with businesses regarding the review of the taxation of intellectual property, the support R&D tax credits provide for innovation as well as the proposals of the Dyson Review – a report led by Sir James Dyson concerning the UK's attempt to become the leading high tech exporter in Europe. This consultation will happen in autumn 2010.

The Conservative/ Liberal Democrat coalition government called the emergency budget following its takeover of the UK parliament in May 2010.

The Chancellor declared his plans to cut the UK's borrowing of 1.1 per cent of gross domestic product (GDP) by fiscal year 2016, with £17bn to be cut from government departments by fiscal year 2015.

The major measures for business announced in the budget include:

  • A reduction in the main rate of corporation tax by 1 per cent each year over the next four years, until it reaches 24 per cent 
  • A cut in small companies' tax rate from 21 per cent to 20 per cent from April 2011
  • The 10 per cent rate of capital gains tax for entrepreneurial business activities to be extended from the first £2m to the first £5m of qualifying gains made over a lifetime
  • A Regional Growth Fund in 2010-11 and 2012-13 to support increases in business employment and growth.


Full details of the budget can be found from HM Treasury

23rd June 2010

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