Tag Archives: uk

Summer Budget 2015

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 …

Continue reading

UK: Another Budget, a bit more for IP businesses

Well, we have the shiny brand new patent box proposals coming in April anyway, so there were no big expectations of this Budget – just as well, really!

There was one ‘direct’ IP announcement – the above the line R&D relief for large companies is increased to 10%, from the originally proposed 9.1%. This doesn’t sound much of an increase, but it’s a large improvement on the 6% that the current large company relief would be worth when the 20% corporate tax rate comes into effect. A blog post on ATL is in the works …

A ‘coming soon’ announcement was also hidden in the Budget documents – the Government plans to introduce consultation on tax reliefs for the visual effects industry. Presumably these will be modelled on the film/quality tv/animation/video games reliefs that we already have, but there’s no detail yet beyond the announcement of consultation.

There were quite a few indirect announcements – things that will benefit IP companies by benefiting companies and sectors in general, including:

– the 20% corporation tax rate: a bonus for large companies, and fairly predictable
– the NICs allowance of £2,000 per business, reducing the costs of employing people
– the extension of the capital gains tax exemption on investment via SEIS: useful for startups looking for funding
– then the grants etc funding, including £1.6bn for Industrial Strategy, part of which will go into a £2.1bn fund for aerospace; a £15m competition for digital content production; and £8m for the Skills Investment Fund, focussed on the digital content sector
– and finally, various initiatives intended to make it easier to raise finance. In theory.

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: patent box – the least you need to know*

  • 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.
* well, the least it seems on first reading that one might want to know …

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: CFC reform – new consultation

Controlled foreign companies (CFCs) in low tax jurisdictions are a headache for tax authorities, with the potential for profit to be earned at a low tax rate and not contribute to the coffers of the government of the parent company’s location.  The potential for profits to be perhaps relocated to the lower tax jurisdiction has resulted in rules to stop such relocation.  In the US, the rules are known as Subpart F; in the UK, they are simply the CFC rules.

In both cases, the result of the rules is some or all of the profits of the CFC are attributed to the parent/shareholder, and so become subject to that in that way in the parent/shareholder’s country.  In the UK (and elsewhere) these rules haven’t quite kept up with the changes in the way in which businesses – particularly multinationals – are run, and it has become clear over the last decade or so that something needs to change.

Perhaps unsurprisingly, income from IP is one of the concerns with CFCs – IP doesn’t pass any border controls when you move it from one owner to another.

Continue reading

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.