BIA Suggests New Venture Capital Fund To Invest In UK Biotech
The BioIndustry Association (BIA) has called on the government to introduce a new venture capital fund structure that will give the public the opportunity to be partners in the UK’s biotech revolution. The fund should be based on the successful Enterprise Innovation Scheme (EIS) and include a new “Holding Relief”, which will reward individuals with further income tax relief if they stay invested in the long-term.
The BIA argues that many existing venture capital funds are too bureaucratic for the general public and don’t invest in the UK’s growing cohort of innovative biotech companies. The BIA’s proposed fund structure would offer income and capital gains tax reliefs with a minimal-bureaucracy system for claiming, and allow pooling of capital in a diversified portfolio to spread risk. Individuals who stay invested for longer-periods – which is critical for knowledge-intensive companies conducting R&D – will be rewarded with further income tax relief.
The trade association’s proposals will also make it easier for fund managers to administer their funds. The 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.
BIA CEO Steve Bates said:
“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 democratise opportunities to share in the success of UK bioscience and provide much-needed long-term capital for the UK’s most innovative companies.
“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.”
The BIA’s proposals were made in response to an HM Treasury consultation for a new fund structure as part of the Patient Capital Review.
In a separate consultation response, the BIA has called for changes to Entrepreneurs’ Relief, which currently unfairly penalises bioscience company founders. The 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%, meaning they currently are excluded from Entrepreneurs’ Relief.