BioWorld International Correspondent

LONDON - Entrepreneurs and CEOs of biotech start-ups in the UK have launched a public campaign against government plans to increase the tax on the sale of venture-backed companies by 80 percent, saying it will discourage investment in new companies.

At present, capital gains tax on investments in companies held for two years or more stands at 10 percent. Under plans to simplify the capital gains tax regime by introducing a single rate regardless of the type of asset sold, that will rise to 18 percent from April.

A number of biotech entrepreneurs and CEOs have signed an open letter and launched an on-line petition to maintain the 10 percent rate saying, "We are convinced that the implications of the proposed changes have not been thought through adequately and believe that the level of taxation for entrepreneurs and smaller investors should not be set at the same level as much larger private equity firms and businesses."

The movement is led by Mark Tucker, CEO of genetic diagnostics company G-Nostics Ltd, of Cambridge, UK, who said people who are willing to take the risk of investing in small technology companies must be motivated and incentivized.

He argued the increase will deter serial investors who are often critical funders of university spin-offs and other start-ups.

The campaigners want the 10 percent rate to be retained also for staff who are given shares in start-ups, claiming such option schemes "are an integral part of a small company's ability to remunerate founders, staff and key consultants to levels that are competitive. Commercializing a technology from a university laboratory spinout involves vision, commitment and often accepting a personal risk."

The proposed change to 18 percent, announced in October, was a response to public disquiet that private equity firms involved in deals worth millions, and in some cases billions, were only liable to pay 10 percent tax on their profits. The increase has been criticized by private equity firms but Tucker said the views of smaller companies and entrepreneurs need to be heard, also.

The UK BioIndustry Association reacted against the increase when it was announced in October, saying it could deliver a "fatal blow" to the UK's bioscience sector. Since then the association has been lobbying behind the scenes for a change of heart, and claims it was instrumental in a promise from the government, given in December, to think again about the proposal.