Corporation tax reduced to 10% on income from patents from April 2013
In the Pre-Budget Report 2009, the Chancellor announced a patent box scheme, commencing April 2013, applying a 10% rate of corporation tax on income from patents.
The Government are aiming to create a practical and competitive scheme to ensure that the UK remains an attractive location for innovation; ultimately leading to an increase in research, development and manufacturing in the UK.
The new tax reduction scheme is intended to benefit innovative industries in general and will directly affect any company with an existing patent portfolio. All sectors of industry can benefit, including manufacturing, energy and utilities, telecoms, aerospace, defence, engineering including software with a technical effect, biotech, pharmaceuticals, consumer businesses and media.
The measure will be introduced in Finance Bill 2011, following a consultation period, and will apply to income from patents which are granted after the legislation is passed. The reduced rate of corporation tax will apply to patent income from 1 April 2013.
We understand from discussions with HM Treasury that the new scheme will not replace or limit existing R&D relief. The combination of the new patent box scheme with the existing R&D tax relief system (giving enhanced tax deductions for R&D expenditure) will place commercial innovative activity in Northern Ireland in a highly favoured tax position.
In view of the fact that UK and European patents can take anywhere from 2 to 4 years from filing to grant we advise that patents filed this year may be in a position to qualify for the favourable tax treatment from 1st April 2013.
Hanna IP is happy to conduct a free IP Audit to identify patentable aspects of your business which could qualify for the favourable tax treatment. Please feel free to contact us at the above address or telephone if you would like more information.
