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The BioIndustry Association has called on the British government to introduce a new venture capital fund structure that will enable the public to invest in the United Kingdom’s biotech revolution.
The BioIndustry Association (BIA) has called on the British government to introduce a new venture capital fund structure that will enable the public to invest in the United Kingdom’s biotech revolution. According to BIA, the fund should be based on the successful enterprise innovation scheme (EIS) and include a new “holding relief” that rewards individuals with further income tax relief if they remain invested in the long-term.The idea is to encourage individuals to invest for the long term, which is crucial for R&D-based companies.
BIA feels that many existing venture capital funds are too bureaucratic for the general public and don’t invest in the UK’s growing number of innovative biotech companies. The fund structure that BIA has proposed would offer income and capital gains tax reliefs with a minimal-bureaucracy system for claiming and would also allow pooling of capital in a diversified portfolio to spread the risk. These proposals are meant to make it easier for fund managers to administer their funds. BIA proposes extending the time fund managers have to identify and invest in suitable companies compared to existing funds and allowing the trading of shares in the fund, with purchasers also benefiting from tax reliefs, to improve liquidity.
“The UK has world-leading bioscience companies that are delivering for patients and investors but too few people have the opportunity to share in their financial success. The fund structure we’re proposing will democratize opportunities to share in the success of UK bioscience and provide much-needed long-term capital for the UK’s most innovative companies,” Steve Bates, CEO of BIA, said in a press statement.“We are working with the government and the investment community to address the scale-up challenge for UK companies. This will take innovative solutions and if we can combine the UK’s strengths in FinTech and biotech, I’m confident we can deliver the finance required for our companies to meet their global ambitions.”
BIA’s proposals were made in response to a consultation with the HM Treasury for a new fund structure as part of the Patient Capital Review.In a separate consultation response, BIA has called for changes to Entrepreneurs’ Relief, which currently unfairly penalizes bioscience company founders. BIA has called on the government to abolish the 5% shareholding requirement for founders to benefit from the reduced capital gains tax rate. The change would only apply to founders of knowledge-intensive companies, which typically raise money through a series of fundraising rounds that dilute the founders’ shareholdings below 5%, which then exclude them from Entrepreneurs’ Relief.