The Autumn Budget published on November 22, 2017 contains – unsurprisingly – a number of measures relevant to IP tax (unsurprising, because the UK government seems to think that tech will save the UK from the perils of the Brexit decision).
From today’s draft Finance Bill overview:
“2.13. Patent Box: cost sharing for collaborative Research and Development (R&D)
As announced at Autumn Statement 2016, the government will legislate in Finance Bill 2017 to add specific provisions to the revised Patent Box rules introduced in Finance Act 2016, covering the case where R&D is undertaken collaboratively by 2 or more companies under a ‘cost sharing arrangement’ (CSA). The provisions will ensure that companies are neither penalised nor able to gain an advantage under these rules by organising their R&D in this way.
The new rules provide that:
- where a company acquires an interest in or increases its interest in a CSA, an appropriate amount of the consideration paid counts as acquisition cost for the purpose of calculating the R&D fraction, to the extent any Intellectual Property (IP) assets are held within the CSA
- where a company disposes of an interest or reduces its interest in a CSA, an appropriate amount of any consideration received is treated as IP income, to the extent any IP assets are held within the CSA
- activity of participants in the CSA to develop IP or products is appropriately treated in the company’s R&D fraction
This has effect for accounting periods commencing on or after 1 April 2017. Draft legislation (provision 24) and a TIIN has been published on 5 December.”
This should be filed under “not particularly surprising”, it’s been a gap in the legislation/guidance for some time.
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 …
Part of the Budget papers included a paper headed “Guidance on avoidance schemes involving the transfer of corporate profits” – at first glance, it looked like guidance on the total return swap scheme that was blocked in December 2013. But … it goes a bit further.
The Research and Development (Qualifying Bodies) (Tax) Order 2012 has been approved by the House of Commons, to come into effect on February 28th, 2012. The Order updates the list of qualifying bodies for R&D purposes – contributions to qualifying bodies can be eligible for the large company R&D relief.
- The proposals have been pretty much reworked in some detail into the draft legislation
- The reduction in the presumed routine profit from 15% of specific expenses to 10% of general overheads means this is less mad than it was, although it’s still pretty silly for patent licensing businesses such as biotechs
- The separation out of the active management requirement is welcome, as it means biotechs etc that licence out their R&D results can still qualify
- A bonus for small companies is that the relief calculation uses the main CT rate so they get a bit more relief than they would if the small co’s rate was used in the calculation
- The doubling of the de minimis to £1m before complex paperwork has to be submitted is useful
- BUT: it’s still unlikely to appeal to anyone much other than the multinational pharmaceutical companies, despite the changes. And still does absolutely nothing for any other substantive form of IP.
- R&D tax relief increased for SMEs to 200% in 2011 and 225% in 2012
- R&D tax credit repayment no longer restricted by PAYE/NICs
- R&D large company relief to include sub-contractor costs
- Patent box to have more consultation – still 10%, still patents only, applying from 1 April 2013
- Capital allowances for short-life assets now 8 years – useful for capital expenditure that doesn’t qualify for R&D allowances, and exceeds the annual investment allowance
- Reductions in corporate tax rate useful to all companies
- Enterprise Zone changes could be attractive
- 24 new University Technical Colleges to be established
IP tax changes in Hong Kong: the Inland Revenue (Amendment) (No. 2) Bill 2011, published on 25 February 2011, proposes
The US Treasury has released the 2012 Green Book (the catchier title for the “General Explanations of the Administration’s Fiscal Year 2012 Revenue Proposals” – the 2012 US Budget!). There are three key IP-oriented measures proposed. The first, discussed below, is taxation of “excess returns” on intellectual property. The second, to be discussed in a following blog post, seeks to limit shifting of income through IP transfers. Finally, and also to feature in a future post, is the enhancement and making permanent of the R&E (research and experimentation) tax credit.