Category Archives: other

UK: 2012 Budget – IP highlights

So what’s in this year’s Budget?  Most of the new stuff in the Finance Bill we already know about (patent box, changes to R&D etc).  Nevertheless, some new and useful things directly for IP came sidling out of the red box:

New creative industries relief
Much requested, here at last!

  • Video games industry relief
  • Quality TV (“Birdsong” was the Chancellor’s example) relief
  • TV Animation relief (aka the “Wallace and Grommit relief”)

These reliefs are intended to come into play in Finance Act 2013 (so, probably, from 1 April 2013) – but will need EU State Aid approval, so this isn’t writ in stone.  There will be consultation over the summer but it wouldn’t be highly surprising to see the new reliefs echo the existing film relief.

VAT relief for European Research Infrastructure Consortia (ERICs)
Secondary legislation will be introduced in autumn 2012 to provide VAT relief for European Research Infrastructure Consortia – no more details yet.

Patent box update
Various tweaks have been announced:

  • the legislation has apparently (not yet published) been clarified to ensure that that worldwide income from inventions covered by a qualifying UK or European Patent Office patent is included.
  • extending qualifying IP: in addition to patents granted by the IPO and EPO the Government intends to extend the Patent Box to other EU Member States which have similar examination and patentability criteria as the UK. A list of qualifying patent jurisdictions will be published as secondary legislation in 2012.
  • the heads of expenditure included in the amounts which have to be marked up have been clarified; and
  • the small claims safe harbour that previously applied to all companies has been limited to companies making profits with residual profits of no more than £3 million.

R&D tax credits update
As announced late last year, there will be a new ‘above the line’ R&D tax credit in Finance Bill 2013 to encourage R&D activity by larger companies. The Government will consult on the detail (supposed to be published today, but no sign of it so far).  It will ensure that SME R&D incentives are not reduced as a result of this change, thankfully.  The above the line credit is useful to larger companies in particular, where the value of the R&D credit isn’t always seen in the R&D department, as it’s a tax item.  Ensuring it’s related to the R&D costs in the accounts would help here; the above the line credit would also have to be repayable (otherwise the auditors probably wouldn’t allow it in the accounts of a loss-making company).

Not specifically IP but useful to IP companies:

Employee share option schemes
The EMI share option scheme rules are being amended from April 2013 (subject to EU approval) so that gains made on shares acquired through exercising EMI options on or after 6 April 2012 will be eligible for capital gains tax entrepreneurs’ relief, and the Government will consult on ways to extend access to EMI for academics who are employed by a qualifying company (for biotech spinouts, most likely).  The EMI scheme allows companies to give employees options over shares with income tax – and now capital gains tax again – advantages.

Investment – relaxing EIS & VCT rules
The EIS and VCT schemes allows small companies to raise cash with tax relief for the investors.  The changes will widen the definition of shares which qualify for relief; and remove the £500 minimum investment limit.

Subject to State aid approval, legislation will also be introduced in Finance Bill 2012 to increase the thresholds for the maximum size of qualifying company for both EIS and VCTs and the maximum annual amount that can be invested in an individual company under all the venture capital schemes.

The quid pro quo, because there had to be one, is that the total investment which a company can receive in one year will be £5 million in total from any State-aided risk capital measure, including EIS and VCT.

Corporate tax rate
The company main tax rate is being cut again – it will be 24% from April 2012 (rather than the 25% previously announced) and will be 22% by April 2014 if the Chancellor doesn’t cut it again!

UK: Football & image rights (again, at last?)

Huh. Not entirely sure how or why I’ve ignored football image rights tax issues in the past – possibly because it’s been rumbling around for years. And years. Maybe even a decade.

Anyway, the Telegraph is now reporting that HMRC have concluded a number of image rights settlements in relation to footballers and football clubs (but not Rangers – apparently the tax bill that tipped them into administration related to employee benefit trusts rather than image rights).

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OT: for amusement (or possibly despair)

From the autumn statement:


  • Italy’s interest rates are now 7.2% … And what are ours? … They are less than 2.5%
  • Yesterday, we were even borrowing money more cheaply than Germany
  • Italy’s rates have gone up by almost 3% in the last year alone
  • we will increase the State Pension Age from 66 to 67 … Germany [has] taken similar steps
  • extending support to British mid-caps who can sometimes lack the overseas ambition of their German equivalents
and then …
  • It’s no good endlessly comparing ourselves with other European countries

PS: Fair enough, I took that last one a little out of context … but nevertheless, comparison when it suits, refusal to compare when it doesn’t. Can’t say I’m over-excited by the proposed employment law changes.

UK: autumn statement

IP tax highlights (more to follow when I’m back from Chicago and have time to see the detail):

  • will introduce a new ‘above the line’ research and development tax credit in 2013 that will increase its visibility and generosity (devil, detail, etc – but arguably the large company relief needs something doing to it, it’s almost useless)
  • non-tax: funds for smaller technology firms in Britain who find it difficult to turn their innovations into commercial success
  • non-tax: almost half a billion pounds for scientific projects, from supercomputing and satellite technology to a world-beating animal health laboratory

OT: UK Tax Tribunal statistics (updated)

Poking around in Hansard can produce some interesting notes at times.  On 4th May 2011, Chuka Umunna (MP for Streatham, Labour) asked the Secretary of State for some information on First Tier Tax Tribunal statistics.  Jonathan Djanogly (MP for Huntingdon, Cons.; Parliamentary Under Secretary of State (HM Courts Service and Legal Aid)) came up with the following for tax appeals received – figures updated with information from the Tribunals Statistics document for the year ended 31 March 2011:

  • 2004-5: 4,110
  • 2005-6: 3,190
  • 2006-7: 3,800
  • 2007-8: 4,160
  • 2008-9: 5,620
  • 2009-10: 10,400
  • 2010-11: 8,900*

UK: R&D consultation, next round

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.

In summary:

  • 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?

UK: Patent box – latest consultation paper

The Treasury has published (a few days later than originally advertised) the next round of consultation on the patent box (pdf).

In summary:

  • 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.

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Internet: Plus ça change – taxing electronic cash*

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?

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UK: Call for extension to qualifying expenditure for R&D tax relief

Tom Watson MP (Labour) is trying to re-start the debate on tax credits for the UK games industry with an Early Day Motion (EDM – Early day motion 1781), calling for improvements to R&D tax credits, particularly an extension for the tax break to include expenditure on premises and the costs of applying for IP protection and design.  The EDM is clearly prompted by Tiga, the UK games industry trade association, but the extension requested appears general rather than specific to the games industry.

An Early Day Motion is mostly chasing publicity – it has no real prospect of debate in Parliament – so don’t expect to see anything change in the Finance Bill.  At the time of writing the EDM had attracted a grand total of 4 signatures, including that of Watson, but they are at least cross-party.