Pharma Yet to Take Full Advantage of UK's Patent Box, Says Expert

By Dan Stanton

- Last updated on GMT

Related tags: Glaxosmithkline, Patent, Pharmacology

Patent Box introduced April 1 2013 but slow pharma uptake?
Patent Box introduced April 1 2013 but slow pharma uptake?
A lack of understanding and commentary on proceedings may be putting some pharma firms off opting into the UK’s Patent Box scheme, according to a legal expert.

Introduced in the UK earlier this year, the Patent Box was intended to encourage local investment by cutting the rate of corporation tax from 23% to 10% on income generated from patents filed after April 1.

“To benefit from the Patent Box scheme pharmaceutical companies must actively own (or exclusively licence) and manage a product which is protected by a patent held at the IPO or EPO,”​ Rhian Osborne, a Director at commercial law firm Greenaway Scott told in-Pharmatechnologist.com.

However, though saving 13% on product income would create substantial savings for a number of pharma companies, she added, “it is difficult to say whether or not companies are benefiting from it at this stage.”

“The issue seems to be the fact that the legislation is new and has yet to be tried and tested,”​ she continued, adding: “The more companies that opt into the scheme, the more the benefits will be seen and reported in practice which will encourage more companies to opt in.

“Similarly, there is no case law or commentary on the drafting of legal documents, such as licences, and loopholes and snags with the scheme itself are yet to be experienced,”​ and thus some “companies may steer clear of making changes at this stage until they are on more certain ground.”

However, one company who has jumped aboard the scheme is pharma giant GlaxoSmithKline who was at the forefront of encouraging the UK Government to pass the legislation​ whilst simultaneously promising to invest £500m into its UK manufacturing operations.

Though “we can’t comment on behalf of other companies,”​ GSK spokesperson Kalpesh Joshi told in-Pharmatechnologist.com, “generally speaking it is fair to say the introduction of the patent box has transformed the way in which we view the UK as a location for new investments.

“This is exemplified by our commitment to build our first new manufacturing factory in the UK for more than 40 years as well as the other financial commitments/investments we made to other UK manufacturing sites.”

The facility in Ulverston, Cumbria​, will produce active pharmaceutical ingredients (APIs) for drug and vaccine products and, according to Joshi, the plans are on track with construction intended to begin late 2014/early 2015.

Double Dutch

The UK is not the first country to have introduced a Patent Box. In the Netherlands the rate of tax on income related to patented or R&D products is set at 5%, following the introduction in 2010 by the Government of its Innovation Scheme in order to address flaws in its original Patent Box passed in 2007.

As well as the Dutch tax rate being half that of the UK, “it does not impose restrictions in respect of which patent office the patent is filed under,”​ said Osborne, and “the tax saving can also be applied to non-patented products that have an R&D Certificate.”

She continued: “As the Patent Box scheme becomes more widely used in the UK we may experience some of the issues the Netherlands came up against. Hopefully, the legislation will then be developed and amended accordingly.”

Related topics: Markets & Regulations

Related news

Show more

Follow us

Products

View more

Webinars