In addition to the patent box paper, the Treasury also published the next round of R&D consultation – this is rather more a summary of responses to the last consultation than new information.
- not ruling out ‘above the line’ R&D relief/credit but the Government still needs to be convinced
- large company subcontractor costs to qualify for the subcontractor only where the subcontractor is aware that it is qualifying R&D and has evidence to this effect
- no plans to extend qualifying expenditure to cover (eg) rent of premises used for R&D
- draft legislation in the Autumn to allow a wider range of externally provided workers to qualify
- no plans to restrict internally created software from being qualifying costs
- improved guidance on whether prototypes will be qualifying R&D – whether the ‘uncertainty’ principle applies
- plans for a pilot scheme will be brought in during the Autumn so that small companies and start-ups can get advance assurances that can be relied on in making R&D claims for several years
The Government is looking for specific responses (by 2 September 2011) on:
- qualifying indirect activities: should the relief be retained? (QIA are hard to define and harder to get relief for)
- should there be some form of certification or election process to provide certainty for subcontractors as to whether the work they are doing is R&D?
- does the removal of the PAYE/NICs limit on the repayable credit require any safeguards?
- does the ‘going concern’ definition need to be reformed, to make it closer to that for EIS/VCT?
The Treasury has published (a few days later than originally advertised) the next round of consultation on the patent box (pdf).
- extended to plant variety rights, data exclusivity and supplementary protection certificates
- will apply to UK and EPO patents only
- will apply to all UK and EPO patents, no matter when commercialised or granted
- to be phased in over 5 years, from 2013/14 – full benefit not until 2017/18
- a seriously complex round of computations will be involved, with analysis of income and expenses across the company and possibly by division required
Responses to the consultation are requested by 2 September 2011.
Bitcoins have suddenly been the subject of flurry of articles in places like the New Scientist (probably because a Swedish IT entrepreneur, Rickard Falkvinge, has announced that he’s putting his money into Bitcoins), with some more hysterical commentators declaring that Bitcoins are a danger to governments because they “can’t be taxed”. I thought I’d add this article to the flurry, to examine that hypothesis.
In summary, governments don’t generally care what format your wealth change is in; they will want the tax paid in their local currency, but are quite happy to let you earn it in anything you like – including Linden dollars, for example (to take a mild blast from the past). You need to declare it on your tax return (translated to local currency) when it increases your wealth; whether or not the Government can easily find out about it is irrelevant to a taxpayer’s obligations under law. To be pedantic (no doubt a first for a tax lawyer), the hysteria also misses the point that currency itself is not generally taxed (except in the case of collectible coins, for example) – tax is based on changes in wealth, which are usually measurable in currency of one format or another.
The main tax question is: when does a virtual currency increase your wealth for tax purposes?