The document introduces two new UK tax reliefs for innovative companies taking effect from April 2013: the Patent Box and Above The Line R&D tax credit. The Patent Box sets the effective tax rate on profits from patents at 10%, while the R&D credit provides a 9.1% cash credit based on qualifying R&D expenditures. Eligibility and calculation rules are outlined for both reliefs. Frequently asked questions address concerns around qualifying criteria, benefits, practical application processes, and cash payments under the new R&D credit scheme.
Employee stock option plans (ESOPs) are used by companies to attract, motivate, and retain employees. There are several types of ESOPs that provide equity incentives like stock options, stock purchase plans, restricted stock units, and stock appreciation rights. Key aspects of ESOPs include how they are granted and vested over time, tax implications, regulatory requirements, and accounting treatment. ESOPs must be implemented according to the rules for listed and unlisted companies set out by the Companies Act, Income Tax Act, SEBI, and other regulatory bodies to ensure proper governance and compliance.
This document discusses various tax issues that arise in mergers and acquisitions under Indian tax law. It covers topics like the meaning of amalgamation, capital gains tax exemptions for amalgamations, treatment of losses and depreciation for the amalgamated company, international tax issues like transfer pricing and thin capitalization. It provides an overview of the key domestic tax provisions around amalgamations, demergers and slump sales. It also gives a brief introduction to concepts of international taxation like offshore financial centers and their implications.
In September 2014, Barclays Bank was fined £37.7 million by the FCA for failing to properly protect £16.5 billion of client assets. This represented significant weaknesses in Barclays' systems and controls for protecting client assets. The new FCA rules introduced in 2014 through a policy statement aim to enhance the UK's client assets protection regime in order to increase confidence in financial markets and better protect client money and assets. The changes will impact how firms handle client money and assets through their operations, IT systems, and policies. All firms are expected to comply with the new rules being introduced in stages by June 2015.
This document provides an overview of tax issues relevant to businesses in the UK, including corporation tax rates and bands, research and development tax credits, pension contributions, entrepreneurs' relief, and tax treatment of company cars. It also discusses the potential tax benefits of declaring dividends versus bonuses for owner-directors and highlights various areas where professional tax advice can help businesses be more tax efficient and manage cash flow challenges.
The document defines amalgamation as the union of two or more companies to form a new entity, discusses the legal procedures and reasons for amalgamation such as tax benefits and synergies. It also outlines the process for acquiring shares of dissenting shareholders through sections 394-396 of the Companies Act and proposed changes in the new Companies Bill.
This document provides information and definitions related to vertical forms of balance sheets and income statements. It explains that vertical forms classify expenses and assets in different subheadings to make a company's financial situation easier to understand at a glance for lenders and investors. Sample vertical formats are also provided for a balance sheet showing assets, liabilities, and owner's equity, as well as an income statement categorizing revenues, expenses, and resulting net profit. Key terms defined include operating/non-operating income and expenses, retained earnings, tangible/intangible assets, loan and owner's funds, and working capital.
Here we have discussed some restructuring ideas used and implemented in recent big deals in India. We have focused on the pros and cons of the strucuture the company choses while undergoing merger, acquisition or internal restructuring process.
1. The document discusses various types of mergers and acquisitions (M&A) transactions including horizontal and vertical integration, diversification, advantages of M&A, and issues from different perspectives of acquirers and target companies.
2. Key regulatory considerations for M&A transactions in India are discussed including the Companies Act, Income Tax Act, Foreign Exchange Management Act, Competition Act, and SEBI regulations.
3. Structures and processes for acquisitions, mergers, demergers, and other spin-offs are outlined along with transaction issues and taxation implications.
Employee stock option plans (ESOPs) are used by companies to attract, motivate, and retain employees. There are several types of ESOPs that provide equity incentives like stock options, stock purchase plans, restricted stock units, and stock appreciation rights. Key aspects of ESOPs include how they are granted and vested over time, tax implications, regulatory requirements, and accounting treatment. ESOPs must be implemented according to the rules for listed and unlisted companies set out by the Companies Act, Income Tax Act, SEBI, and other regulatory bodies to ensure proper governance and compliance.
This document discusses various tax issues that arise in mergers and acquisitions under Indian tax law. It covers topics like the meaning of amalgamation, capital gains tax exemptions for amalgamations, treatment of losses and depreciation for the amalgamated company, international tax issues like transfer pricing and thin capitalization. It provides an overview of the key domestic tax provisions around amalgamations, demergers and slump sales. It also gives a brief introduction to concepts of international taxation like offshore financial centers and their implications.
In September 2014, Barclays Bank was fined £37.7 million by the FCA for failing to properly protect £16.5 billion of client assets. This represented significant weaknesses in Barclays' systems and controls for protecting client assets. The new FCA rules introduced in 2014 through a policy statement aim to enhance the UK's client assets protection regime in order to increase confidence in financial markets and better protect client money and assets. The changes will impact how firms handle client money and assets through their operations, IT systems, and policies. All firms are expected to comply with the new rules being introduced in stages by June 2015.
This document provides an overview of tax issues relevant to businesses in the UK, including corporation tax rates and bands, research and development tax credits, pension contributions, entrepreneurs' relief, and tax treatment of company cars. It also discusses the potential tax benefits of declaring dividends versus bonuses for owner-directors and highlights various areas where professional tax advice can help businesses be more tax efficient and manage cash flow challenges.
The document defines amalgamation as the union of two or more companies to form a new entity, discusses the legal procedures and reasons for amalgamation such as tax benefits and synergies. It also outlines the process for acquiring shares of dissenting shareholders through sections 394-396 of the Companies Act and proposed changes in the new Companies Bill.
This document provides information and definitions related to vertical forms of balance sheets and income statements. It explains that vertical forms classify expenses and assets in different subheadings to make a company's financial situation easier to understand at a glance for lenders and investors. Sample vertical formats are also provided for a balance sheet showing assets, liabilities, and owner's equity, as well as an income statement categorizing revenues, expenses, and resulting net profit. Key terms defined include operating/non-operating income and expenses, retained earnings, tangible/intangible assets, loan and owner's funds, and working capital.
Here we have discussed some restructuring ideas used and implemented in recent big deals in India. We have focused on the pros and cons of the strucuture the company choses while undergoing merger, acquisition or internal restructuring process.
1. The document discusses various types of mergers and acquisitions (M&A) transactions including horizontal and vertical integration, diversification, advantages of M&A, and issues from different perspectives of acquirers and target companies.
2. Key regulatory considerations for M&A transactions in India are discussed including the Companies Act, Income Tax Act, Foreign Exchange Management Act, Competition Act, and SEBI regulations.
3. Structures and processes for acquisitions, mergers, demergers, and other spin-offs are outlined along with transaction issues and taxation implications.
This document provides an overview of R&D tax credits in the UK. Some key points:
- R&D tax credits incentivize companies to invest in innovative technology by providing tax relief of up to 32% of qualifying R&D costs.
- Both profitable and unprofitable companies can claim tax credits, either as a reduction in taxes owed or as a cash refund.
- Qualifying costs include direct labor, external staff, subcontracted R&D work, and consumables used in R&D projects.
- To qualify for credits, projects must involve technical uncertainty that a competent professional could not easily resolve.
The UK Patent Box tax regime came into effect on 1st April 2013. With the benefits of the regime now fully available to all UK companies, ClearViewIP took a look at the savings on offer, the criteria to meet and how to make sure you are getting the most out of the corporation tax savings. See the Briefing Note here: http://www.clearviewip.com/publications/patent-box-infographic/
A deep dive into R&D tax credits for small and medium-sized enterprises (SMEs)Alexander Clifford
R&D tax credits for small and medium-sized enterprises (SMEs) is an unmissable opportunity for businesses in the UK to receive vital financial support for their innovation. Research and Development activities create a greener, more efficient and exciting future for our society, overcoming the industrial challenges with outside-the-box thinking. The UK’s government not only encourages their R&D endeavours but rewards through R&D tax relief. This article showcases the business benefits of the R&D tax credit scheme and provide all the information you need to understand the criteria and claiming process of said scheme.
The UK patent box tax regime provides a 10% corporate tax rate on profits attributable to patents and other qualifying intellectual property. The regime is being phased in over 5 years, starting at a 16.7% tax rate in 2013 and decreasing to the final 10% rate by 2017. To qualify for the patent box, a company must hold patents or exclusive licenses and meet development criteria or active ownership tests. Patent box profits are calculated in 3 stages - identifying qualifying IP income, extracting a routine profit amount, and removing an amount related to marketing assets. The regime provides tax benefits for UK companies developing and exploiting their patent portfolios.
This document discusses R&D tax incentives and reliefs for companies in the UK, including schemes for small and medium enterprises. It provides details on qualifying criteria for SME status, how enhanced deductions or tax credits for R&D expenditures are calculated, eligible R&D costs, exclusions, rules around state aid grants, the claims process, and introduces the new Patent Box incentive effective from 2013.
Tax Relief for Innovation: Patent Box and R & D Credits Regime by Dan Brookes...Jane Lambert
This is Dan Brookes's presentation to Leeds Inventors Group on 8 May 2013. Dan Brookes is a tax director of the Leeds office of BDO. The presentation is an introduction to the patent box, a tax concession for companies with qualifying patents which came into force on 1 April 2013. It introduces the regime, sets out the conditions and contains a worked example. There is also an introduction to the existing R & D credits scheme
1) The document proposes a designated tax of 1-2% on the turnover of large research companies exceeding a certain monthly threshold, with the tax funds used to speed up intellectual property application processing and dispute resolution.
2) Benefits include getting new products and services to market faster in Europe, creating incentives for companies to keep R&D in the EU, and supporting job growth.
3) The tax would be evaluated annually over 7 years, with the goal of reducing IP application processing time by 1/3 and dispute resolution time by 1/2, to determine if it achieves success.
Research and Development Tax Credit and Patent Boxmary tierney
This document provides tips for claiming R&D tax relief in the UK. It discusses identifying qualifying R&D projects and costs, capturing salary and other eligible expenses, subcontracting R&D work, and planning remuneration. It also outlines how the UK patent box regime works, including establishing relevant IP income, actively managing intellectual property, and making the necessary election. Key recommendations include thinking widely about qualifying profits and expenses, maintaining R&D spending, ensuring a fair allocation of costs, and making the election if wanting to benefit from the lower tax rate on patent income.
The OECD and EU Commission are cracking down on patent box tax regimes that provide tax advantages for intellectual property income. They consider some current regimes to provide unfair tax benefits without requiring real economic activity in the granting country. Reforms are aimed at closing loopholes and increasing transparency, focusing on issues like substantial activities and nexus between the tax benefits, R&D expenditures, and income earned. This crackdown raises questions about whether European IP box regimes will still attract R&D companies and whether corporate tax arrangements will face more scrutiny in the future.
The Research & Development (R&D) Tax Incentive is a targeted,
generous and easy to access entitlement program that helps
businesses offset some of the costs of doing R&D. The program
aims to help more businesses do R&D and innovate. It is a broadbased
entitlement program. This means that it is open to firms of
all sizes in all sectors who are conducting eligible R&D.
International Perspectives - Tax & Other Considerations for Bioscience CompaniesCBIZ, Inc.
This document provides an overview of tax and government incentives for bioscience companies internationally. It discusses worldwide taxation vs territorial vs deferral approaches and defines permanent establishments. It then summarizes key R&D incentives and tax breaks available in several countries, including Singapore, the Netherlands, Ireland, Germany, Switzerland, the UK, and Malaysia. For Malaysia specifically, it outlines the BioNexus tax incentives and funding assistance through the Biotechnology Commercialization Fund.
The document summarizes key features of India's startup policy, including:
1) Self-certification allowances for startups to reduce regulatory burden, a Rs. 10,000 crore credit guarantee fund, and a mobile app to simplify registration.
2) Tax exemptions for startups for 3 years in a block of 5 years, tax exemptions for incubation funds, and capital gains tax exemptions.
3) Plans to set up additional incubators, research parks, and bio clusters to promote innovation and entrepreneurship.
4) Karnataka's startup policy aims to create 6 lakh jobs, reimburse marketing costs up to 30% annually, and mobilize Rs. 2,000 crore
Our team of R&D tax credit specialists has developed a comprehensive guide that serves as a vital resource for businesses aiming to capitalise on the potential of research and development tax relief. By delving into the intricacies of these credits, the guide offers valuable insights to diverse audiences, including entrepreneurs, business leaders, and decision makers. The eBook covers essential aspects such as eligibility criteria, qualifying R&D activities and costs, navigating the claim process, and more. It unravels complex tax incentives and empowers you with actionable insights to make well-informed decisions regarding your R&D tax claims.
This document provides information about funding and tax incentive programs in the UK to support innovation and research and development. It discusses the Seed Enterprise Investment Scheme (SEIS) and Enterprise Investment Scheme (EIS) which provide tax relief for equity investments in small companies. It also summarizes R&D tax credits that reward innovation, the Patent Box that lowers taxes on profits from patented inventions, and various grant programs from Innovate UK including Smart Grants. The document provides guidance on eligibility and claiming these different innovation support programs in the UK.
Vfb2012 access to finance Smith & Williamson Andrew Jupp tax creditsScience City Bristol
This document discusses UK tax credits for research and development (R&D) costs and the patent box regime. It summarizes that the UK provides enhanced tax deductions for qualifying R&D costs, including 225% for SMEs and 130% for large companies. It also discusses the patent box regime, which provides a 10% corporate tax rate on profits from commercial exploitation of patents, to encourage innovation. The document provides details on qualifying costs and activities for R&D tax credits, as well as ownership and profit calculation rules for the patent box.
DMIEXPO - Arosal - Where To Hold Your IP: The A To Z Guide For Digital MarketersMorning Dough
Arosal will walk you through the challenges and pitfalls which characterize the global tax scene post-BEPS, specifically as regards IP Boxes and the so-called ‘Nexus’ approach. We shall walk you through the process of registering and protecting your IP, whilst designing a robust international structure which will stand up to any BEPS-related challenge.
Furthermore, Arosal will outline the services which you will require, and the process through which these will be obtained regarding the implementation of your structure, whilst focusing on the tax optimization of the group’s entire structure as concerns all types of taxes. Finally, we shall discuss the administration of your international structure, and comment on the way forward in the global market place.
This presentation by Mr Vince Walker, a tax partner at the Liverpool offices of BDO, was the second presentation to the meeting of Liverpool Inventors Club of 29 April 2013 on the Patent Box. It sets out the patent box concession in the context of other concessions to encourage R & D in the UK. It explains the conditions and provides a worked example.
Tax breaks for small businesses.
Covers R&D tax credits, the enterprise investment and corporate venturing scheme, the enterprise managment incentives.
Tax Strategies In A Challenging Economy.Pptpspizzirri
This document discusses various tax strategies that the law firm Hall Booth Smith & Slover employs to help clients enhance cash flow and achieve permanent tax savings. Some strategies mentioned include taking advantage of tax credits, intellectual property planning, severance payments structuring, meals and entertainment deductions, and net operating loss carrybacks. The firm reviews clients' individual and business situations to determine the best strategies.
TalkTalk is a UK telecom provider that recognizes revenue from services like broadband, phone, TV, and mobile. Revenue is important for measuring business growth. TalkTalk recognizes revenue based on IAS 18 principles, such as when services are provided. Revenue is reported as £1,835m for 2016 and is broken down into on-net, off-net, and corporate segments. While revenue increased over five years, complex long-term contracts make revenue recognition difficult. Earnings per share is an important ratio but has limitations as a sole performance measure, as it can be manipulated and impacted by accounting changes. TalkTalk's EPS declined from 2015 to 2016 due to rising costs despite stable revenues.
- The document discusses research conducted on UK mid-market corporates and non-bank lenders to understand their perspectives and experiences with non-bank lending.
- The research found that mid-market corporates are aware of various non-bank lending options and have positive perceptions of non-bank lenders. 61% of corporates had used a non-bank lender before, most commonly credit funds, private equity funds, and junior debt funds.
- The research also examined non-bank lenders and found gaps in understanding between lenders and corporates regarding deal terms, conditions, and ownership expectations that can cause deals to fall through. Non-bank lenders indicated direct lending to corporates as their preferred
The document is a finance guide from Grant Thornton about the UK film industry. It provides an overview of key UK film financing programs like the Enterprise Investment Scheme (EIS) which offers tax reliefs for investors in film companies. The EIS allows for 30% income tax relief, capital gains tax exemption if shares are held over 3 years, and deferral of capital gains tax against EIS investments. It outlines qualifying criteria for investors, companies and business activities. The guide is intended to help clients in the film production and distribution sectors understand their financing and tax options.
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This document provides an overview of R&D tax credits in the UK. Some key points:
- R&D tax credits incentivize companies to invest in innovative technology by providing tax relief of up to 32% of qualifying R&D costs.
- Both profitable and unprofitable companies can claim tax credits, either as a reduction in taxes owed or as a cash refund.
- Qualifying costs include direct labor, external staff, subcontracted R&D work, and consumables used in R&D projects.
- To qualify for credits, projects must involve technical uncertainty that a competent professional could not easily resolve.
The UK Patent Box tax regime came into effect on 1st April 2013. With the benefits of the regime now fully available to all UK companies, ClearViewIP took a look at the savings on offer, the criteria to meet and how to make sure you are getting the most out of the corporation tax savings. See the Briefing Note here: http://www.clearviewip.com/publications/patent-box-infographic/
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R&D tax credits for small and medium-sized enterprises (SMEs) is an unmissable opportunity for businesses in the UK to receive vital financial support for their innovation. Research and Development activities create a greener, more efficient and exciting future for our society, overcoming the industrial challenges with outside-the-box thinking. The UK’s government not only encourages their R&D endeavours but rewards through R&D tax relief. This article showcases the business benefits of the R&D tax credit scheme and provide all the information you need to understand the criteria and claiming process of said scheme.
The UK patent box tax regime provides a 10% corporate tax rate on profits attributable to patents and other qualifying intellectual property. The regime is being phased in over 5 years, starting at a 16.7% tax rate in 2013 and decreasing to the final 10% rate by 2017. To qualify for the patent box, a company must hold patents or exclusive licenses and meet development criteria or active ownership tests. Patent box profits are calculated in 3 stages - identifying qualifying IP income, extracting a routine profit amount, and removing an amount related to marketing assets. The regime provides tax benefits for UK companies developing and exploiting their patent portfolios.
This document discusses R&D tax incentives and reliefs for companies in the UK, including schemes for small and medium enterprises. It provides details on qualifying criteria for SME status, how enhanced deductions or tax credits for R&D expenditures are calculated, eligible R&D costs, exclusions, rules around state aid grants, the claims process, and introduces the new Patent Box incentive effective from 2013.
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This is Dan Brookes's presentation to Leeds Inventors Group on 8 May 2013. Dan Brookes is a tax director of the Leeds office of BDO. The presentation is an introduction to the patent box, a tax concession for companies with qualifying patents which came into force on 1 April 2013. It introduces the regime, sets out the conditions and contains a worked example. There is also an introduction to the existing R & D credits scheme
1) The document proposes a designated tax of 1-2% on the turnover of large research companies exceeding a certain monthly threshold, with the tax funds used to speed up intellectual property application processing and dispute resolution.
2) Benefits include getting new products and services to market faster in Europe, creating incentives for companies to keep R&D in the EU, and supporting job growth.
3) The tax would be evaluated annually over 7 years, with the goal of reducing IP application processing time by 1/3 and dispute resolution time by 1/2, to determine if it achieves success.
Research and Development Tax Credit and Patent Boxmary tierney
This document provides tips for claiming R&D tax relief in the UK. It discusses identifying qualifying R&D projects and costs, capturing salary and other eligible expenses, subcontracting R&D work, and planning remuneration. It also outlines how the UK patent box regime works, including establishing relevant IP income, actively managing intellectual property, and making the necessary election. Key recommendations include thinking widely about qualifying profits and expenses, maintaining R&D spending, ensuring a fair allocation of costs, and making the election if wanting to benefit from the lower tax rate on patent income.
The OECD and EU Commission are cracking down on patent box tax regimes that provide tax advantages for intellectual property income. They consider some current regimes to provide unfair tax benefits without requiring real economic activity in the granting country. Reforms are aimed at closing loopholes and increasing transparency, focusing on issues like substantial activities and nexus between the tax benefits, R&D expenditures, and income earned. This crackdown raises questions about whether European IP box regimes will still attract R&D companies and whether corporate tax arrangements will face more scrutiny in the future.
The Research & Development (R&D) Tax Incentive is a targeted,
generous and easy to access entitlement program that helps
businesses offset some of the costs of doing R&D. The program
aims to help more businesses do R&D and innovate. It is a broadbased
entitlement program. This means that it is open to firms of
all sizes in all sectors who are conducting eligible R&D.
International Perspectives - Tax & Other Considerations for Bioscience CompaniesCBIZ, Inc.
This document provides an overview of tax and government incentives for bioscience companies internationally. It discusses worldwide taxation vs territorial vs deferral approaches and defines permanent establishments. It then summarizes key R&D incentives and tax breaks available in several countries, including Singapore, the Netherlands, Ireland, Germany, Switzerland, the UK, and Malaysia. For Malaysia specifically, it outlines the BioNexus tax incentives and funding assistance through the Biotechnology Commercialization Fund.
The document summarizes key features of India's startup policy, including:
1) Self-certification allowances for startups to reduce regulatory burden, a Rs. 10,000 crore credit guarantee fund, and a mobile app to simplify registration.
2) Tax exemptions for startups for 3 years in a block of 5 years, tax exemptions for incubation funds, and capital gains tax exemptions.
3) Plans to set up additional incubators, research parks, and bio clusters to promote innovation and entrepreneurship.
4) Karnataka's startup policy aims to create 6 lakh jobs, reimburse marketing costs up to 30% annually, and mobilize Rs. 2,000 crore
Our team of R&D tax credit specialists has developed a comprehensive guide that serves as a vital resource for businesses aiming to capitalise on the potential of research and development tax relief. By delving into the intricacies of these credits, the guide offers valuable insights to diverse audiences, including entrepreneurs, business leaders, and decision makers. The eBook covers essential aspects such as eligibility criteria, qualifying R&D activities and costs, navigating the claim process, and more. It unravels complex tax incentives and empowers you with actionable insights to make well-informed decisions regarding your R&D tax claims.
This document provides information about funding and tax incentive programs in the UK to support innovation and research and development. It discusses the Seed Enterprise Investment Scheme (SEIS) and Enterprise Investment Scheme (EIS) which provide tax relief for equity investments in small companies. It also summarizes R&D tax credits that reward innovation, the Patent Box that lowers taxes on profits from patented inventions, and various grant programs from Innovate UK including Smart Grants. The document provides guidance on eligibility and claiming these different innovation support programs in the UK.
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This document discusses UK tax credits for research and development (R&D) costs and the patent box regime. It summarizes that the UK provides enhanced tax deductions for qualifying R&D costs, including 225% for SMEs and 130% for large companies. It also discusses the patent box regime, which provides a 10% corporate tax rate on profits from commercial exploitation of patents, to encourage innovation. The document provides details on qualifying costs and activities for R&D tax credits, as well as ownership and profit calculation rules for the patent box.
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Tax breaks for small businesses.
Covers R&D tax credits, the enterprise investment and corporate venturing scheme, the enterprise managment incentives.
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This document discusses various tax strategies that the law firm Hall Booth Smith & Slover employs to help clients enhance cash flow and achieve permanent tax savings. Some strategies mentioned include taking advantage of tax credits, intellectual property planning, severance payments structuring, meals and entertainment deductions, and net operating loss carrybacks. The firm reviews clients' individual and business situations to determine the best strategies.
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Your guide to the Patent Box and Above The Line R&D tax credit
1. New tax incentives
driving UK innovation
Your guide to the Patent Box and
Above The Line R&D tax credit
From 1 April 2013 two new tax reliefs for innovative
companies come into effect. This high level guide
sets out some of the opportunities and frequently
asked questions to help identify how these might
benefit your company.
2. Fast-facts
Patent Box
Research & Development
(R&D) above the line tax credit
What is it?
10% effective tax rate on profits derived
from patents including the sale of products
incorporating a patented component, and some
services based on patented technology
A cash credit from HM Revenue & Customs
(HMRC) equal to 9.1% of a company’s
expenditure on qualifying R&D activities
What are the key
opportunities?
• ny tax paying companies/groups with
A
qualifying patent rights can reduce their UK
tax liabilities
• oss making large companies can benefit from
L
cash credits for the first time
• Loss making companies should consider
positioning themselves to take advantage of the
relief when they become profitable
• mall and medium-sized enterprises (SMEs)
S
receiving grant funding or with subsidised
RD expenditure can also claim 9.1% cash
credits
• All companies should consider whether they
can patent items which they produce or use
Who does it apply to?
Any UK companies/groups who could protect
their intellectual property (IP) with patents.
‘Large’ loss making UK companies
undertaking RD and SME companies with
subsidised and/or subcontracted RD
Is it optional?
Yes. You need to ‘elect in’ to the patent box
regime. The company must elect into the Patent
Box regime by giving notice to HMRC that it is
a qualifying company with a qualifying patent,
exclusive licence or patent pending and from
which accounting period the company would
like to be within the regime. The company must
notify HMRC on or before the first anniversary
of the corporation tax self assessment (CTSA)
filing deadline for that accounting period. The
company is then in the Patent Box regime for
future periods.
Yes. Until 1 April 2016, claims can either be made
under the existing RD tax relief scheme or the
new RD tax credit scheme (but not both).
Who should I
contact for
more details?
Samantha Vanags
Partner - Head of RD
T 01865 799805
E samantha.j.vanags@uk.gt.com
3. FAQs… Patent Box
Who can qualify?
To qualify for the Patent Box regime, a company must own
a qualifying patent or an exclusive licence under a qualifying
patent. The company must also have been involved in the
development of the patented invention. Broadly, if the company
meets these criteria, then it can elect into the regime.
What are the benefits?
The adjusted profits arising on the income from patents are
partially excluded from UK corporation tax, such that they are
taxed at a reduced effective rate. This reduced rate will be 10%
from 1 April 2017. The benefit is being phased in from 1 April
2013 such that approximately 33.9% of the adjusted profit is
exempt from UK corporation tax and then increases in stages to
approximately 52.4% from 1 April 2017.
What is a qualifying patent?
A patent is a qualifying patent if it is a current patent, irrespective
of when granted, and the current patent was granted by one of
the following:
• UK Intellectual Property Office;
• the European Patent Office; or
• the patent office of Austria, Bulgaria, Czech Republic,
Denmark, Estonia, Finland, Germany, Hungary, Poland,
Portugal, Romania, Slovakia or Sweden.
The rules also extend to other forms of intellectual property
such as supplementary protection certificates and certain plant
variety rights.
What is an exclusive licence under a patent?
An exclusive licence needs to give the licensee an exclusive right
to exploit the patent in one or more countries and the right to
enforce the patent against any infringement of those rights.
If the patent is held by a group company and the patent rights
are conferred on another company in the group, then that other
company is to be treated as holding an exclusive licence.
“We welcome HMRC’s recent
clarification on the practicalities of
the detailed patent box calculations.
In particular, the commercial view
taken in respect of the marketing
return appears fairer than the
legislation originally implied, with
restrictions seemingly focussed on
the largest consumer brands.”
Wendy Nicholls, Head of Transfer Pricing
Calculation of patent box profits
Step 1: Split profits between qualifying for patent box
and non-qualifying
The regime applies to the profits arising from the sale
of products containing the patented invention, licence
and royalty fees from the patent, proceeds of sale of the
patent and damages for infringement of the patent or other
compensation. The income includes all worldwide income
generated from these sources for the UK company. In other
words all worldwide income relating to the patent and the
patented invention received by the company.
In addition, where a patented process is used in the
manufacture of product for sale then a ‘notional royalty’
can be charged for the use of the patented process and this
will be treated as income from a patent.
The ratio of qualifying income to total income is used to
split taxable profits (after certain adjustments) as step 1.
Step 2: Deduct a routine return
The profit relating to income from qualifying patents or
exclusive licences is then adjusted to allow for a ‘normal’
return on certain overheads.
Step 3: Deduct a brand or marketing return
The aim of this adjustment is to remove the element of
profit that does not relate to the intellectual property in the
patent, such as brand value or normal commercial margin
on operations.
Do the rules apply to patent pending profits?
If you have applied for a qualifying patent but it has not been
granted yet then the benefit of this Patent Box regime can apply.
The benefit accrues while the patent is pending, and is applied
after the grant of the patent. The accrued benefits are restricted to
the patent profits arising in the six years up to the date of grant of
the patent (and arising after 1 April 2013).
What happens with losses?
If a company makes losses then it may not be beneficial to elect
into the Patent Box regime, although in some cases this may
allow the company to access enhanced losses to offset against
future profits.
Where a ‘patent loss’ arises (ie the company makes a loss from
its patent income), it can be offset against other patent profits.
If the company is a member of a group and another group
company has patent profits, any remaining patent loss must be
offset against group patent profits. If the patent loss exceeds the
patent profits (including group patent profits), then the excess is
carried forward and offset against future patent profits.