The Government has finally enacted (in Finance (No.2) Bill 2010, which will become Finance (No.3) Act 2010, a relaxation for small and medium-sized companies’ (SMEs) R&D tax relief by removing the requirement that they own any intellectual property that results from the R&D.
So, what did the budget do for IP? Well, left it mostly alone – for now at least. The swings and roundabouts of corporate tax changes and other such matters will affect IP-related businesses in the same way as they affect all businesses, but the budget releases are fairly light on IP specific material.
IP- related announcements in today’s Budget:
- Following consultation on design, the Government will introduce a tax relief for the UK video games industry, subject to state aid approval from the European Commission. No more detail than that, but it will presumably be similar to the film/sound recordings reliefs.
- The Government is creating a £270 million Higher Education Modernisation Fund in 2010-11. This fund will enable universities to identify and drive efficiencies in the sector and fund an extra 20,000 undergraduates on courses starting in September 2010, with priority given to key subjects like science, technology, engineering and mathematics.
- A little more news on the patent box announced in the 2009 Pre-Budget Report: the Government will work with business to design a practical and competitive regime for patents to support the UK’s strengths in innovative industries. This will include looking at how to identify and value embedded patent income and how to give relief to acquired patents. In addition to patents granted after legislation is passed in 2011, the consultation will also consider how to include patents not yet commercialised at that point, and how the regime will apply to equivalent overseas patents held by UK companies. The Government will be consulting with business over the summer.
The Treasury’s multinational business forum has the UK’s controlled foreign companies (CFC) rules back onto its agenda. The CFC rules are intended to stop UK companies routing passive income to subsidiaries in low tax jurisdictions overseas – passive income can include royalties from licences of intellectual property (amongst other forms of income). The CFC rules were originally intended to be updated as part of the legislation bringing in an exemption from corporation tax for foreign dividends, but the proposed changes were so broad as to be unworkable and would have meant that UK companies would be penalised for owning any subisidiaries with IP; the Treasury then postponed the CFC rules update to have more time to consult with business.