BREXIT AND TAX: WHAT’S IN STORE FOR BIOTECHS?

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THERE IS no doubt that biotech fundraising rounds are getting bigger, companies are getting bigger and, as tax advisors, we are being faced with previously unheard of issues. Take profits – these could result in corporation tax liabilities, groups so large or profitable that they cannot claim SME R&D tax credits or future milestone income that might need patent box treatment to reduce tax bills. All at a time when the UK rules on using tax losses have changed.

Luckily we are never happier than being absorbed in spreadsheets that set out various scenarios for clients. Given the amount of change in the industry and in the tax rules there really is no alternative to crunching the numbers.

Brexit, Brexit Brexit… yawn. For us, we don’t expect March 29, 2019 – or even the end of the Brexit transitional period – to mean anything for our clients in terms of share schemes, corporation tax, R&D tax credits and so on. Many UK rules we deal with were drafted without reliance on EU regulations, but those that were, such as SME definition, or EIS limits, we do not expect to change any time soon.

Where we would like some loosening of the tax rules, such as the patent box nexus rules, will likely be some time coming, or, depending on our state aid position, may not happen at all. So as we sit here today pouring over our spreadsheets, nothing changes in light of Brexit and tax, but we will be sure to tell you if it does.