CTM41355 – Particular bodies: Pharmaceutical cases: Background

Manufacturers of medicines, distributors linked to manufacturers, and those researching and developing new medicines, present special tax risks.

• This is a successful and highly profitable industry.
• The product is easily transported, and as much of the industry is organised globally, there is a high risk of transfer pricing abuse.
• The actual cost of manufacturing medicines is small compared with the value of the product, which lies in the intellectual property (patents, trademarks, licenses and agreements) resulting from expensive research and development; these are areas where the tax treatment is in the process of change.
• There are a number of tax issues that are distinctive to the industry.
• Research and Development tax relief is a common claim in such cases and the work of dealing with such claims is being centralised, including in the specialist pharmaceutical offices.

Accordingly, there is a need for specialist knowledge of the industry, and for a consistency of approach, all of which is achieved through training courses and frequent interchange on live issues, under the guidance of the HMRC Pharmaceutical Specialists within LBS Chemicals, Healthcare and Pharmaceuticals.