ECJ: Licensing know-how intra-EU for lower VAT rate is not necessarily ‘abusive’

WebMindLicenses Kft. v Nemzeti Adó- és Vámhivatal Kiemelt Adó- és Vám Főigazgatóság (Case C–419/14)

The ECJ decision on the WebMindLicenses case (published 17 Dec 2015) provides guidance on points to consider when determining whether a licensing agreement amounts to VAT ‘abuse’ (and, accordingly, points to watch to make sure a licensing agreement is not abusive!)

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UK patent box proposals: summary

The UK announced on Thursday (22nd October) its (rather long awaited) proposals to update the patent box to make it compliant with the OECD BEPS proposals on amendments to patent/knowledge boxes. The UK proposals set out a series of questions for consultation, with draft legislation to come in December.

tl;dr version: it’s more generous that it might have been on grandfathering, but companies had better get their accounting software ready to do some serious work in order to keep track once into the new regime. The added complexities that will be added may well put off companies from claiming.

There are no proposals to include software copyright as qualifying IP, although the BEPS project does permit this – and the Irish knowledge box draft rules, published on the same day, do include software (and the Irish knowledge box offers a 6.25% effective rate. Just in case you wondered).

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Summer Budget 2015

Summer Budget 2015 – summary of the IP angles

The Summer Budget took a few sideswipes at IP tax in passing – the biggest issue being likely to be the removal of amortisation for acquired goodwill (and so any unregistered IP included therein, probably) and customer-related intangible assets. There were some good points as well, although those were mostly in the realm of general improvements in the corporate tax field.

The one thing not mentioned is the patent box – which, following the OECD BEPS announcements earlier this year and the UK/German agreement last year, is supposed to be amended/updated by legislation in 2015. Presumably it’s been put off to the Autumn Statement and the draft 2016 Finance Bill …

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Autumn statement and apologies for radio silence

Between my practice as a barrister and being President of the CIOT (http://www.tax.org.uk) my free time for writing has basically disappeared – I’m updating on twitter at the moment but haven’t managed to get a twitter-to-wordpress plugin to function properly yet! and have now managed to get a plugin working, so that tweets will appear in the sidebar albeit not as posts (it failed again).

Which is a roundabout way of apologising for the silence on here and tumbleweeds rolling through of late. Normal service will be resumed in about May 2015.

But quickly – the UK autumn statement include good news for R&D (increases in the value of the relief), but yet another tax on multinationals (25% on “artificially diverted profits”. Quite how that interacts with transfer pricing, CFC rules, and the FA2014 anti-diversion rules remains to be seen …). This has, of course, been called a Google tax. The annual take from it looks puzzlingly low, as far as I could see from the policy document etc. Also more on tv reliefs and children’s tv programme relief etc …

Budget 2014 – IP tax impact

On a quick skim through the Budget papers, IP tax impact of the Budget is as follows:

– R&D repayable tax credit for SMEs going up to 14.5% from 11% for expenditure on/after 1 April 2014: means the government will contribute (in effect) 32.625% of R&D expenditure for loss-making SMEs. Might be time-limited, as the Impact Note seems to suggest no cost to the Exchequer from 2016-17, but that might just be that they haven’t worked out the figures.

– video games tax relief being tweaked to make it EU compliant, and to clarify that separate trade requirement is only for games for which relief is claimed. Similar point for tv relief – only programmes for which relief is claimed need to be treated as separate trades.

– theatrical production tax relief to be introduced, with consultation coming soon on the design of the relief (do any theatre companies actually make a profit for which they could get tax relief? I may be being cynical …)

– introducing an exemption from insurance premium tax for insuring certain risks relating to space satellites (the mind boggles …)

– update to tax rules to prevent duplicate capital gains relief on reinvestment of gains on disposal of tangible assets into the acquisition of an intangible fixed asset (pre-19th March 2014 claims to be adjusted when calculated future tax impact); there’s arguably a drafting error in CTA 2009 that could lead to double tax relief, although HMRC are “confident that the courts would recognise [it] as a drafting error”.

– R&D allowances to be excluded from the loss-buying anti-avoidance rules: sorting out a snafu in last year’s Finance Act, rather than a radical change.

– annual investment allowance going up to £500k until December 2015: applies to all businesses, not just those with IP. Mostly political posturing, as not all that many businesses spend more than the current £250k allowance on plant & machinery etc during the year (annual investment allowance enables expenditure on these items to be deducted in full on purchase, instead of being deducted in tranches over several years). When originally introduced, the allowance was £50k and was considered to cover the annual qualifying expenditure of over 95% of all UK businesses. So a £500k limit isn’t going to make much difference to the majority of businesses.

– capital gains tax relief on reinvestment in SEIS shares will be made permanent: applies to all start-ups, and is intended to make investment more attractive (investors get income tax relief and capital gains tax relief on the investment).

– online (and other remote) gambling will be subject to UK gambling taxes if aimed at UK customers