By Claire west
The Government's decision to move ahead with plans to introduce a tax incentive for research and development activity in the UK from 2013 is encouraging news for British industry, according to one of the UK's leading patent and trade mark attorney firms, Withers & Rogers LLP.
Originally announced by Alistair Darling in his pre-Budget statement in December 2009, the Government has announced a consultation on the so-called 'Patent Box', which could see royalties and other profits from patented products and technologies being taxed at the lower corporation tax rate of just 10 per cent. A consultation to review R&D tax incentives as a whole has also been promised.
If the plans go ahead, the 10 per cent tax rate will apply from 1 April 2013 and will be applied to patents first commercialised after 29 November 2010.
Adrian Tombling, patent attorney at Withers & Rogers LLP, said:
"The lower rate of corporation tax is likely to be very attractive to all companies with a strong focus on R&D and this will help to secure inward investment in the UK."
Despite uncertainties about how the tax incentive will be applied, Withers & Rogers LLP believes that the 'Patent Box' could increase the rewards generated by patents, while broadening the range of activities than can benefit from R&D tax relief could potentially reduce the costs associated with gaining patent protection. Adrian Tombling explains:
"While it is not yet clear what type of patent-related income will qualify for the 10 per cent tax incentive, it is possible that this could extend to cover both royalty income and 'embedded' income - other income from a product that can be attributed to the patent. It is possible that the costs associated with obtaining patents could be brought within the R&D tax incentives scheme. Any reduction in tax liability in these areas would be regarded as significant by many companies."
The decision to progress plans to introduce the 'Patent Box' is the latest in a series of recent Government announcements that will encourage companies in the UK to do more to protect their intellectual property. Adrian Tombling adds:
"The recent changes to the Civil Procedure Rules, which took effect at the start of October 2010, make it easier for small and medium-sized businesses to enforce their IP through the courts, without the risk of being left with a hefty bill for court costs. Cumulatively, the Patent Box regime and the Civil Procedure Rule changes will benefit a wide range of UK-based businesses."