Government reportedly weighing up an exit tax for spinouts
In one of his first interventions as science minister, Chris McDonald has expressed concerns that too many UK science and technology companies are heading overseas in order to scale. Speaking to The Times, McDonald says that he wants to ensure that UK research provides “greater benefit to British people.”
As well as access to finance, the minister raises access to lab space as another factor driving relocations to the USA and elsewhere.
His comments to the media were preceded by a report in the Sunday Times over the weekend – based on “industry sources”, rather than official government briefing – that the government is moving forward with plans for a so-called “exit tax” on UK-based companies (such as university spinouts) which choose to move abroad after having benefited from public investment.
Officials are said to be evaluating a fee system based on a percentage of a company’s valuation in the event that it is sold to investors abroad or taken public in another country. The Department for Business, Innovation, Science and Technology declined to comment on the proposals when invited to by the Sunday Times.
The Treasury’s Entrepreneurship in the UK policy paper, published alongside last autumn’s Budget, set out the government’s commitment to ensuring that innovative companies would “start, scale, and stay in the UK.” The section on retaining companies in the UK – “at all stages, from idea to IPO” – focused on incentives, rather than barriers to listing abroad.
The paper also argued that university spinouts and other high-growth firms are not always best served by relocating:
“Whilst the size of the US market is often a key draw to listing in the US, the data shows that it’s not the right option for many companies. In fact, UK firms often perform better when they list in the UK.”
The House of Lords Science and Technology Committee last year warned that the UK was “bleeding to death” due its inability to retain science and technology companies. The government response agreed that the UK would benefit from supporting innovative firms to “realise the full extent of their potential.”