The UK government has decided against implementing an exit tax on university spinouts that relocate their operations or list on foreign stock exchanges. The proposal, which had caused concern among investors and entrepreneurs, was privately communicated as being definitively ruled out by Business Secretary Jonathan Reynolds.
Sources from the Department for Business and Trade indicated that the government's strategy is to enhance the UK's environment and incentives for businesses rather than imposing punitive measures. This decision offers relief to investors who feared the tax would create a double burden, as universities already secure substantial equity stakes in spinouts at their inception.
Investor groups, including Creator Fund and Parkwalk Advisors, had voiced strong opposition to the exit tax. They argued that it would not only penalize founders and investors but could also negatively impact the appetite for backing early-stage ventures, potentially driving companies away from the UK. The Startup Coalition had also gathered over 150 signatures on an open letter against the proposed levy.
Northern Gritstone, an investor in spinouts across northern England, has opened a San Francisco office to attract US capital, with CEO Duncan Johnson emphasizing the need for international expansion to not conflict with domestic wealth creation. He noted that companies require access to markets like the US, and international investors do not necessarily imply international headquarters.
Ale Maiano, co-founder of Wilbe, suggested that instead of new taxes, the government could better support spinouts by encouraging universities to create more favorable environments. This includes scrutinizing university administrative costs and the equity secured by tech transfer offices from spinouts.
