The UK Pre-Budget Report today had a couple of IP moments – overall potentially useful, but really just not trying hard enough. It’s another missed opportunity, doing little or nothing to support the majority of IP-focussed business.
10% tax on patent royalties
Good news? Well, yes: but only if you’re planning on receiving income from ‘innovative industries’ (it looks like it’s only going to be available for pharmaceutical and biotech patents). This is very much less generous than the similar royalty taxes in the Netherlands, Luxembourg and Belgium – all of which equate to a tax rate of around 6% and are available for a much wider range of IP.
Broadly, good news for smaller business doing research that will lead to pharma/biotech patents – although 10% is higher than the Benelux options, the costs of successfully operating a non-UK company and keeping its profits out of the claws of the UK Revenue could be more than the 4% difference in rates for a small business.
The sting in the tail (because there had to be one): this doesn’t come into effect until April 2013, and will only apply to patents granted on or after that date [edited to add: possibly earlier - one reference on the Treasury site notes that it will apply to patents granted after the legislation is passed. Don't bet on the legislation being passed before April 2013]. There is advance publicity, and then there are Budget announcements. Trying to be more positive, there is some time to work on the government (any government!) to expand the scope of this proposal.
R&D relief: ownership requirement removed
Of wider (and more immediate) use is the change (effective today) in requirements for small and medium-sized company R&D relief: there is no longer any requirement that the company owns the IP resulting from the R&D. Although HMRC could be flexible on this (eg: for university spin-outs with licences) they have also been very unhelpful in some cases.
And the controlled foreign companies update?
This has now pushed back to the New Year; so no update on the last report that indicated HM Treasury might be listening to business’ requests that actively managed IP holding companies be outside the regime.
Anything else?
Various incentives to scrap boilers, redirected (possibly re-redirected and almost certainly money previously announced, it’s not clear yet) money to medical research and low-carbon incentives – which will indirectly help some IP businesses.
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Tags: controlled foreign companies, patent box, pre-budget report, relief, uk