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Pharma hopes for UK budget's R&D tax credits plan

ABPI is positive proposals in Chancellor George Osborne's budget will encourage larger pharma firms to invest in development as the BIA calls for more measures to help smaller companies

The UK government's autumn budget has been given a mildly positive reception by the country's pharmaceutical industry, particularly the extension of its R&D tax credits scheme to large companies in addition to smaller firms.

Chancellor George Osborne unveiled almost £21bn in 'credit-easing' measures in the budget to help small and mid-sized enterprises (SMEs) "that do not have ready access to capital markets".

Among the measures included in the budget was confirmation of a reduction in the rate of corporation tax; the creation of a £75m fund to help technology-based SMEs to develop and commercialise new products and services; a £20bn loan guarantee scheme over two years to encourage bank lending to small businesses; and a £1bn, non-bank investment fund for SMEs.

Osborne also introduced an expanded Seed Enterprise Investment Scheme (SEIS), which will allow people who invest up to £100,000 in a qualifying new start-up business to be eligible for income tax relief of 50 per cent, regardless of their tax bracket. The scheme is also open to companies, who can invest up to £150,000.

Meanwhile, Osborne announced that the government would introduce an 'above the line' tax credit in 2013 to encourage R&D activity by larger companies, while promising that existing provision for SMEs would be unaffected.

The tax credit move was welcomed by the Association of the British Pharmaceutical Industry (ABPI), whose CEO Stephen Whitehead said: "Extending R&D tax credits to larger firms will encourage pharmaceutical companies to further invest in their own business and in new medicines."

The BioIndustry Association (BIA) was less impressed, saying that while the measures will be of some help to innovative bioscience companies they could have gone further.

It welcomed the creation of the £75m technology fund and the SEIS, but questioned whether this would provide long-lasting benefits. It would like to see measures introduced to allow tax-free investment by individuals of £15,000 a year in funds targeted exclusively at innovative SMEs.

"A similar scheme in France [which] has funded many bioscience companies has raised €5.5bn," noted the BIA.

Commenting on the tax credit move, Samantha Vanags, R&D tax partner at Grant Thornton, said: "The government is already committed to providing 225 per cent relief to SMEs from April 1, 2012, and now they plan to bring in an 'above the line credit' for large corporates… who are making tax losses."

"Although all the detail isn't yet available, it now looks likely that there will be immediate cashflow benefits to loss-making corporates who are involved with technological innovation," she added.

30th November 2011

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