Intellectual Property – A Reason To Quit The UK?
By Colin Aylott, International Tax Director at Smith & Williamson
There are many reasons why a UK business might choose to relocate. Grants, availability of staff or resources, or issues such as quality of life or transport links can all be drivers for moving overseas. A significant consideration for many businesses investigating moving their operations to new countries are the tax implications. And one area given increasing attention is the tax reliefs for R&D and intellectual property (IP).
R&D tax reliefs in the UK
The UK introduced enhanced tax reliefs for R&D expenditure in 2000 for small/medium companies and in 2002 for...
...large companies, though this is a less generous regime. As expected, there are a number of conditions which need to be satisfied in order to claim this relief. Until recently HMRC has been keen for companies to claim it, however, the general fiscal tightening has seen this attitude change such that more claims are now coming under scrutiny. Despite this, the relief is seen as useful, if not exceptional in world terms.
The UK also now allows tax relief for amortisation or impairment of certain IP. Again, this is welcome.
Where the UK does suffer in comparison to some other countries is as follows:
• royalty income is taxable at normal corporation tax rates with no reduction in the amount chargeable to tax
• a possible restriction of expense deductions against royalty income (for a pure IP holding company)
• no opportunities for significantly accelerating tax relief for investments in valuable IP
• no reduction in payroll taxes for employees involved in R&D activities (or other personal tax concessions)
• grant income remains fully taxable.
Encouraging news on patents in the UK
The proposed UK 'patent box' regime, which is expected to apply a 10% corporation tax rate on income arising from patents, may help... continued on page two >