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UK: The Budget & IP

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.

UK: CFC discussion document published

HM Treasury has published the discussion document on the future of taxation of controlled foreign companies. Of particular interest to IP are the questions on how they should treat overseas companies with IP, proposing to distinguish between those that actively manage the IP and those that passively receive it.  The effect would be to ensure that UK parent companies are not taxed on the profits of IP holding subsidiaries in certain circumstances (to be defined!)

The document simply asks questions at this point, rather than suggesting any particular line of thought.  In particular, it seeks responses on what constitutes active management of IP – this is likely to be an interesting area of discussion, as many of the characteristics of active management would seem to reflect well-managed investment IP activities as well.

UK: Tax Case: Prolab Nutrition Europe Limited TC00269

Prolab Nutrition Europe (TC00269): the customs value of goods for import duties includes any royalties and licence fees paid as a condition of sale (Article 29(1)/Article 32(1) of Council Regulation 2913/92 (the Community Customs Code).   The court held that payments for exclusive distribution rights are not royalties or licence fees for the purposes of determining customs value.

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