Proposed Fund to Democratise Biotech Investment Opportunities

The Government has been called on 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 UK Bioindustry Association said that 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’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 said. Proposals include 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 proposals from BIA 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 also called for changes to Entrepreneurs’ Relief, which currently unfairly penalises bioscience company founders. The BIA has suggested abolishing 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.