Previously announced measures in relation to the R&D tax credit and the proposed new Patent Box have been confirmed.
The Government intends to introduce an ‘above the line’ R&D tax credit in Finance Bill 2013 to encourage R&D activity by larger companies. There will be a consultation on the detail but the Government has stated that it will ensure that SME R&D incentives are not reduced as a result of this change.
As previously announced, the proposed UK Patent Box regime, an effective 10% rate of corporation tax on worldwide profits attributable to qualifying patents and similar intellectual property (IP) rights, will be introduced with effect from 1 April 2013. The Government has noted that the sectors most likely to benefit from this are pharma, life sciences, manufacturing, electronics and defence.
The Government has made some significant and positive changes to the Patent Box proposals during the consultation process over the past year (a number of which were lobbied for by Olswang on behalf of clients) and the regime is more generous than a number of other jurisdictions’ IP taxation regimes in certain respects. However, it still involves a high level of complexity and it only applies to a relatively narrow range of IP rights, so it remains to be seen whether it will achieve its objective of encouraging investment into innovation in the UK (whether from existing or new businesses).