HM Revenue & Customs published new guidance for university spinouts

On 29 April 2005, HM Revenue & Customs published new guidance for academics acquiring shares in university spinout companies. The guidance explains the new legislation enacted in the recent Finance Act 2005. As explained in previous Law-Nows, the university spinout industry virtually ground to a halt as a result of the draconian income tax charges experienced by academics following the "schedule 22 legislation" introduced in July 2003. Finance Act 2005 introduces a new tax relief for academics to alleviate some of the problems.

University spinouts can take many forms but, typically, an academic works for a university and is involved in research that has a potential commercial application. A spinout company is therefore set up to develop the intellectual property (IP), the academic subscribes for shares in the spinout and the university licenses or assigns the IP to it. Venture capital investors often buy shares in the spinout as well. It is almost inevitable that