The EU has published a consultation document (external PDF) on the proposed UK video games relief, inviting comments – it’s all pretty much as expected, but interesting to note that at para 34, the document states that “… as in the Commission’s preliminary assessment of the French video games tax credit [in 2006], the Commission doubts that the proposed UK video games cultural test would ensure that the aid would support only games with cultural content without leading to undue distortion of competition in this ver competitive market”. The French credit was ultimately approved by the EU, which adds weight to the view that the UK credit may also ultimately be approved.
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!