Positive responses to UK Budget proposals, concern over who benefits from tax credit

Drug companies have expressed "welcome" to a number of measures contained in the latest UK government budget proposal, outlined in a speech by the Chancellor of the Exchequer, Gordon Brown, in London on March 22. A number of proposals are genuinely attractive to the UK pharmaceutical market, including R&D tax credits to allow drug testers to offset the cost of clinical trial vol-unteers against their taxable liabilities, a single budget for medical research of at least L1.0 billion ($1.76 billion) and extending the more favorable R&D tax relief for small-medium-enterprisess to companies with up to 500 staff.

The London-based BioIndustry Association said that "the government's ring-fencing of the R&D budget and other new measures announced today will help support the vital bioscience R&D work being conducted in this country." The BIA particularly welcomed the extension of R&D tax credits, it said in a statement, because the previous limit was both "an obstacle to consolidation" and failed to take account of the problem for bioscience firms which may trade for a number of years before they make any profits.

David Cobb, an R&D tax issues expert at Deloitte, said that the new tax credit for clinical trial fees could fail to benefit drug companies, depending on the detailed wording of the proposed tax regulation. Because pharm-aceutical companies are prohibited from having direct contact with volunteers, the fees are paid by intermediary firms that conduct the trials on behalf of drugmakers. This could lead to confusion as to which firm qualifies for the tax credit.