By Max Clarke
A fresh tax break intended to foster innovation among British businesses took a step closer towards implementation today, with HM Revenue & Customs’ publication of their latest consultation document.
Initially proposed in November last year, the Patent Box regime will reward holders of intellectual property rights by offering a reduced, 10% corporation tax rate on any profits that stem from their innovations.
By extending the tax break it is hoped that businesses will be encouraged to capitalise on their innovations, rather than selling them off overseas.
Its stated aim is "to provide an incentive for companies in the UK to retain and commercialise existing patents and to develop new innovative patented products [to] encourage groups 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."
The Patent Box regime’s protection of patented technologies is explicit, and similar incentives are not being extended to trademarks or other forms of copyright.
Similarly, the low tax is being introduced to incentivise ongoing innovation and is not intended for passive holders of successful patents. ‘Rigorous policing’ by HMRC will ensure the regime’s stated aims are met.
Since its announcement, a Liaison Committee representing the heads of businesses including AstraZeneca, Santander and Tesco, has been established in order to oversee smooth implementation of the new tax regime.
If elected, although the Patent Box regime will not come into effect for another two years, business owners are being advised to begin preparing for the changes so that they will be better able to benefit from the tax break.
The current consultation period will end on September 2nd 2011.
With thanks to Smith & Williamson