Feeds

Patent tax break takes effect in April 2013

'Patent Box' is strong incentive for UK companies to develop IP

Choosing a cloud hosting partner with confidence

A 10 per cent corporation tax rate will apply to profits from companies' worldwide trading activities which are attributable to qualifying patents, the Treasury confirmed in draft Finance Bill 2012 legislation published today, establishing the 'Patent Box' tax regime.

The Patent Box will allow companies to elect to apply a 10 per cent rate of corporation tax from 1 April 2013 to all profits attributable to qualifying patents, whether paid separately as royalties or embedded in the price of products.

"The Patent Box will provide an additional incentive for companies in the UK to retain and commercialise existing patents and to develop new innovative patented products," the consultation response says. "This will encourage companies to locate the high-value jobs associated with the development, manufacture and exploitation of patents in the UK and maintain the UK’s position as a world leader in patented technologies."

Qualifying patents will be those granted by the UK's Intellectual Property Office or the European Patent Office.

The response document states that the government intends to compile a list of other EU member states that have patent regimes with comparable patentability criteria and search and examination practices to the UK, with the intention of extending the Patent Box to include those regimes.

The regime will also apply to other qualifying intellectual property rights such as regulatory data protection (also called "data exclusivity"); supplementary protection certificates (SPCs), and plant variety rights. Other non-qualifying profits in these companies will continue to be taxed at the main rate of corporation tax.

The draft legislation confirms that, as proposed in the last consultation document, the Patent Box will apply to existing as well as new intellectual property (IP), and to acquired IP provided that the group has further developed the IP or the product which incorporates it.

"It is welcome that the regime will apply to existing IP as well as new IP, and that the Government has listened to points raised in the consultation around the compliance burden of the regime," said John Christian, a tax expert at Pinsent Masons, the law firm behind Out-Law.com. "A workable regime is emerging and business will be positive about the proposals.”

The response to consultation document confirms that the regime will be phased in over five years in order to manage the cost of extending the regime, despite some responses to the consultation which called for the regime to be phased in more quickly to provide a greater incentive for groups to invest in the UK in the early years of the plan.

The response to the consultation gives details of further changes that the government proposes to make to the patent box regime which it states will "result in a more competitive and accessible regime".

The draft legislation sets out a structured approach to calculate the profits from qualifying IP.

For companies selling patented products or licensing their patents, the calculation starts from the total profit from the sale of products incorporating the patented invention or the profit from licensing the invention. The full rate of corporation tax will still be charged on a 10 per cent routine return on certain costs and on any part of those profits which is attributable to marketing intangibles.

Companies making smaller claims can choose a simpler calculation avoiding the need to value their brand. All remaining profit will be eligible for the Patent Box rate.

"Businesses will be able to benefit regardless of how they use their IP – whether it is licensed to others, included in products they sell, or used in internal processes or to provide services," states the consultation response.

The main rate of corporation tax from April 2012 is currently planned to be 25%, following the proposed reductions from the current rate of 26%.

A Treasury consultation paper consultation paper (52-page/587KB PDF) published in June 2011 asked for the view of business on the proposed design of the Patent Box.

Copyright © 2011, OUT-LAW.com

OUT-LAW.COM is part of international law firm Pinsent Masons.

Business security measures using SSL

More from The Register

next story
Phones 4u slips into administration after EE cuts ties with Brit mobe retailer
More than 5,500 jobs could be axed if rescue mission fails
Israeli spies rebel over mass-snooping on innocent Palestinians
'Disciplinary treatment will be sharp and clear' vow spy-chiefs
Apple CEO Tim Cook: TV is TERRIBLE and stuck in the 1970s
The iKing thinks telly is far too fiddly and ugly – basically, iTunes
Huawei ditches new Windows Phone mobe plans, blames poor sales
Giganto mobe firm slams door shut on Microsoft. OH DEAR
Phones 4u website DIES as wounded mobe retailer struggles to stay above water
Founder blames 'ruthless network partners' for implosion
Found inside ISIS terror chap's laptop: CELINE DION tunes
REPORT: Stash of terrorist material found in Syria Dell box
Show us your Five-Eyes SECRETS says Privacy International
Refusal to disclose GCHQ canteen menus and prices triggers Euro Human Rights Court action
prev story

Whitepapers

Providing a secure and efficient Helpdesk
A single remote control platform for user support is be key to providing an efficient helpdesk. Retain full control over the way in which screen and keystroke data is transmitted.
Saudi Petroleum chooses Tegile storage solution
A storage solution that addresses company growth and performance for business-critical applications of caseware archive and search along with other key operational systems.
Security and trust: The backbone of doing business over the internet
Explores the current state of website security and the contributions Symantec is making to help organizations protect critical data and build trust with customers.
Reg Reader Research: SaaS based Email and Office Productivity Tools
Read this Reg reader report which provides advice and guidance for SMBs towards the use of SaaS based email and Office productivity tools.
Security for virtualized datacentres
Legacy security solutions are inefficient due to the architectural differences between physical and virtual environments.