Tax law 'kills' spin-offs...

October 22, 2004

The Government is killing university spin-off companies "stone dead" it was claimed last week, as figures revealed a dramatic decline in the number of academic start-up firms.

University entrepreneurs are being deterred by laws that make founders of companies liable for tax on the value of companies even before they have begun trading, according to Christopher Grayling, the Conservative Shadow Higher Education Minister.

In the House of Commons, Mr Grayling rubbished the Chancellor Gordon Brown's boast that the Government's science strategy was helping university spin-off companies and offering incentives to science-based industry.

Mr Grayling told The Times Higher : "The Chancellor appears worryingly naive. Clearly, he has no idea of the problems and is unaware of what's going on."

Figures released last week show the number of spin-off companies created by universities halved in a year after the changes to tax laws.

In 2002-03, universities spun off an estimated 172 companies, according to a survey carried out by the University Companies Association (Unico). The following year, this fell to 89.

Unico also found that the bosses of about 70 of the companies set up last year were not aware of the tax laws.

Tony Raven, director at the Southampton University Centre for Enterprise and Innovation, said that there was also a risk that people would delay exploiting their research until a way could be found around the law.

"I would stress that time is often crucial to whether you make it in the market or are too late," he said.

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