This week new tax breaks designed to boost the attractiveness of the UK as a location for pharmaceutical research and development have gone live, with the phasing in of the Patent Box and an above-the-line R&D tax credit of 10% for larger companies.
April 1 saw the introduction of these much anticipated measures, which the government is hoping will boost the UK's competitiveness for inward investment, a crucial element of economic growth.
The Patent Box, which was first touted by George Osborne back in 2011, enables companies to apply a lower rate of Corporation Tax to profits earned from UK patented inventions and other innovations.
Its introduction "will provide an incentive for companies – including those in life sciences – to exploit their intellectual property in the UK", and should make the UK "a prime location for investment in R&D and manufacturing," said Steve Bates, chief executive of the BioIndustry Association.
The government has estimated that the relief, which will be phased in from with a lower rate of tax 10%, will save British businesses £1 billion in corporation tax.
Also of benefit are the changes to the R&D tax credits system, under which tax relief has been raised from 9.1% to 10% offering companies a real-terms benefit which, the Guardian quotes Deloitte's Carmen Aquerreta as claiming, equates to around £1.1 billion worth of tax relief over five years.
The Patent Box and changes R&D tax credits complement other recent measures designed to encourage investment in the UK, such as the cut in corporation tax to 20% for SMEs and to 24% for larger companies, Bates notes.
And Martin Hook, Managing Director of leading research and development tax specialists, Alma Consulting Group, said the introduction of these new relief schemes is "excellent news as it gives innovative pharmaceutical firm the boost they need" to "create jobs, inject cash into the UK economy, and help pull the UK out of the recession".