A quick overview of the UK Budget today, from an IP tax perspective:
R&D relief – from 1 April 2015, the rates are going up (again) to:
– R&D expenditure credit: 11%
– SME relief: 230%
– repayment credit rate stays at 14.5%
(all as announced at Autumn Statement, confirmed to be in next week’s Finance Bill)
– HMRC are planning to provide (on request!) advance assurances (valid for three years) on whether R&D activities qualifies, for smaller companies, giving certainty for those new to the regime – it’s just a pity we have to wait until Autumn 2015 for the assurances to be available.
– HMRC are proposing to reduce the time taken to process claims from 2016 (but no detail on this provided)
– the planned new guidance for smaller companies also welcome, as is the plan for publicity campaign to raise awareness of the relief
– there’s a ‘roadmap’ for “further improvements over the next two years” to come, which could be interesting
– HMRC have confirmed that the restriction on prototypes and first in class etc announced in the Autumn Statement will be in the Finance Bill next week. The change will mean that the cost of consumables incorporated in products of R&D activity which are sold (not scrapped or given away) will be excluded from R&D tax credits. It’s interesting that this change appears to be estimated to save half of the cost of increasing the rates.
Creatives reliefs extensions:
– film relief: extended to be 25% of surrendered losses for all, removing the distinction between limited budget films and others (subject to State aid clearance). This simplifies the relief and makes it easier for films with budgets on the borderline of £20m to determine the amount of relief available to them; it effectively extends the FA2014 change which softened the cliff edge element of the relief for large budget films.
– high-end tv relief: the minimum UK expenditure reduced from 25% of filming activities to 10%, and the cultural test is to be modernised (all subject to State aid clearance). Broadens the range of productions that will qualify.
– children’s tv relief: confirmed from 1 April 2015 (includes game shows and competitions, which are excluded from the ‘Downton Abbey’ high-end tv relief)
– the proposed orchestra relief is confirmed to be introduced from April 2016 (subject to the views of the government in power in April next year!)
Paintings as plant and machinery
This could re-named HMRC’s belated revenge on the Howard estate: assets which have been lent to a business will not be able to be treated as plant and therefore a wasting asset unless the vendor has used it in their own business. This follows, unsurprisingly, from the case brought against HMRC by the estate of the late Lord Howard, which succeeded in having a 200 year old painting, previously displayed at Castle Howard, treated as a wasting asset and exempt from CGT on sale.
Investment reliefs – changes to Enterprise Investment Scheme(EIS), Venture Capital Trust, and Seed EIS reliefs
– the employee threshold (500) to qualify for these investment reliefs is being doubled for “knowledge-intensive” company (whatever that might mean; no detail yet!). This is in line with R&D relief, although financial thresholds not apparently being increased.
– the total investment cap for VCT expended £15m, or £20m for “knowledge-intensive” company.
– but the company must now be < 12 years old unless investment for substantial change in activity. It seems odd to restrict investment relief in companies that are trying to continue to grow; there’s no magic about passing your first decade in business that means suddenly that investment is only needed for substantial changes.
Perhaps unsurprisingly, patents are mentioned nowhere … we’ll have to wait for the BEPS reports to see what happens there.