There has been a lot of talk in the media recently about a tax proposal in the UK that should offer companies more incentive to invest in innovative industries, such as pharma and biotech. The proposal, dubbed the ‘patent box’ was announced in the UK HM Treasury’s Pre-Budget Report 2009.
So what exactly is the patent box? It’s a reduced rate of corporation tax that will apply to income from patents from April 2013. The UK government has said it will consult with businesses on the detailed design of the initiative in time for the Finance Bill 2011.
Already the patent box has elicited positive reactions from the industry. In a press statement, the Association of the British Pharmaceutical Industry has commended the government for “taking a step that will bring advanced pharmaceutical manufacturing investment back to Britain”. The BioIndustry Association (BIA) has also welcomed the proposal. Clive Dix, Chairman of the BIA, said in a press statement: “The Government has recognized that life sciences is essential to building Britain’s future and the ‘patent box’ shows that the Government is listening to the BIA and others in the UK life sciences sector.”
In a press statement, GlaxoSmithKline (GSK) explained that it believes “the new system will significantly improve the UK’s international competitiveness and encourage long-term inward investment in the UK from companies seeking to build their future high technologies and manufacturing capability.”
Importantly for the UK, GSK has also said the patent box will allow it to increase its existing investment in the country. Near-term likely investments include creating a state-of-the-art biopharm manufacturing facility. The company has also committed investment to its facility in Ware, which manufactures respiratory medicines.
So the general consensus is that the patent box is a great idea. Looking at some other media reports, such as the UK newspaper The Telegraph, however, there is one aspect that has been criticized: the timing. Although the patent box will provide incentive for companies to invest, 2013 is still a long way away…