Tax on Profits from Patents to be reduced to 10% - Ongoing consultation process
John Moore of Kingly Brookes LLP reminds us that this is an opportunity for the local science and technology business community to influence future policy & practice in this area and provides an overview of the proposals.The latest consultation document looks at the potential mechanics of the scheme and invites responses from interested parties. It is clear that, at this stage, there are many complexities and uncertainties that require further input from business and that the relief may not be as generous, in practice, as companies may be expecting.
In order to assist companies exploiting technology in understanding how the proposal might affect them we have provided an overview of the proposed regime and highlighted some practical steps that companies, should be undertaking to assess the impact of the proposed regime on them. This will potentially be important for any company forecasting future tax cash flows as well as in undertaking planning around where and whether patents are applied for.
Link to overview of the proposed Patent Box regime.
Our view
The proposed Patent Box regime clearly has potential merit and, in addition to the R&D tax relief is another example of the Government using the corporation tax regime to encourage the development of innovative technology to benefit UK plc. Whilst some of the uncertainties regarding the method of calculation raised in the first round of consultation have been addressed, the currently proposed regime is not without its complications and does not appear to offer the headline benefits that many may well have been expecting. In order to ensure that this regime ends up being as effective as possible companies will need to engage with the Government to suggest areas for improvement. We suspect that the only way that a company will be able to determine whether it decides to take advantage of the regime from 1 April 2013 will be to model the effects and to explore what the optimal methodology is given the particular fact pattern for the claimant. This will require an up front, but potentially valuable, investment of resources.
As specialists in advising technology companies on the Proposed Patent Box regime and R&D tax relief claims Kingly Brookes will be taking an active part in this process. We would be happy to meet with you to discuss any thoughts that you may wish to put forward as part of this process and to discuss the potential implications for your company. The closing date for responses is 2 September 2011.
Please do not hesitate to contact John Moore on 0207 292 8850 or at [email protected] if you would like to discuss the implications of this for your company.
About Kingly Brookes
Kingly Brookes is a firm of chartered accountants based in Cambridge and London specialising in working with technology companies to optimise their claims for R&D tax relief and to understand the potential to benefit from the forthcoming Patent Box regime when it is enacted.