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UK tax reforms prompt £500m manufacturing investment by GSK

Published on 30/11/10 at 11:33am
GSK's UK headquarters
Chief executive Andrew Witty: "When implemented, the patent box has the potential to transform the way in which the UK is viewed by companies such as GSK."

A decision by the UK Government to reform the corporation tax system has been followed by a major job creation and investment commitment by GlaxoSmithKline.

The pharmaceutical giant has said it will invest £500 million in its UK manufacturing network and create around 1,000 jobs, thanks to the government's plans to create a 'patent box', which lowers the tax rate on profits from products based on UK-owned intellectual property.

The announcement confirms investment proposals GSK made a year ago when the patent box was first outlined by the Labour government.

The current coalition government has yet to thrash out exact details of the reforms, but at present they would see a 10% rate of corporation tax on profits from patents introduced in April 2013.

"When implemented, the patent box has the potential to transform the way in which the UK is viewed by companies such as GSK as a location for new investments in high added-value R&D and manufacturing," commented GSK chief executive Andrew Witty.

He said the £500 million investment package would be used to scale up existing manufacturing and build a new facility, while £50 million would also be set aside in a venture capital fund "to invest in new technologies such as green chemistry". Part of the money will go towards setting up a green chemistry facility at the University of Nottingham.

One of the main beneficiaries of the investment cash will be GSK's plant in Ware, Hertfordshire. This is the manufacturing site for GSK's next-generation single-step activation inhaler, which will be used for the company's new combination asthma drug Relovair (fluticasone furoate/vilanterol trifenatate), a highly-touted successor to £5 billion brand Seretide (fluticasone propionate/salmeterol).

The move will ensure the UK is the location for firm's next biopharmaceutical manufacturing plant, said Witty. The company plans to carry out a feasibility study to identify the best location for the plant during 2011, and says existing sites in Montrose in Scotland, and Ulverston and Barnard Castle in the North of England will be considered first.

Barnard Castle will also benefit from the installation of a new cream and ointment manufacturing unit, while Ware will get additional investment in continuous tablet manufacturing technology.

Tax credit review promised

The new corporation tax reforms, introduced by UK Chancellor George Osborne yesterday, also include a promise to review R&D tax credits.

Designed to help encourage R&D-based industries in the UK, these have been criticised for having complex eligibility criteria and constantly changing rules which it is claimed have limited their uptake. Earlier in the year there had been fears that the R&D tax credit scheme would be culled by the new Conservative administration.

Exchequer Secretary to the Treasury David Gauke said: "In recent years, too many businesses have left the UK amid concerns over tax competitiveness. It's time to reverse this trend. Our tax system was once viewed as an asset. And it needs to be an asset again.

"That is why the Government is prioritising corporate tax reform. Responding to the concerns of business, the UK is headed for a more competitive, simpler, and more stable tax system in the future, creating the right conditions for investment"

Phil Taylor

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