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Taxation of innovation r&d tax patent box cipa talk by ip tax solutions


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Taxation of Innovation. Talk by Steve Livingston LLB FCA on the lifecycle of innovation and how UK tax incentives fit together to support the business lifecyle from start up to exit.

Covering SEIS / EIS - R&D tax credits - Patent Box

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Taxation of innovation r&d tax patent box cipa talk by ip tax solutions

  2. 2. A BIT ABOUT US… • ip tax solutions is a specialist tax advisory practice • We advise companies from ambitious start-ups to international groups on accessing and optimising Government tax incentives such as: • Patent Box • R&D tax credits • Seed EIS / EIS • We are proud to be advising some of the UK’s leading-edge SME companies • A bit about me ip tax solutions
  3. 3. WHAT WE WILL COVER • How the Patent Box fits into a wider IP innovation lifecycle? • Patent Box – a (very) brief refresher • Some practical points to watch out for on the Patent Box • Where are we now post ‘Patent Box Bashing’? • Working together (and why we possibly should have been since 2000…) ip tax solutions
  4. 4. WHY IS THE PATENT BOX IMPORTANT? • Shows that the UK is “open for business” • Ambitions to be THE destination of choice in the G20 for global companies • Phased introduction of a series of IP related tax incentives • Recognition that IP creation generates high value jobs and export opps • Keeps pace with other countries that have similar tax incentives • Retains and attracts IP-rich companies in the UK ip tax solutions
  5. 5. INNOVATION LIFECYCLE – TAX INCENTIVES Start-up Phase • Seed EIS / EIS – tax favoured investment for trading companies incl. those that create their own IP • Seed EIS – offers 50% income tax relief for investors plus, inter alia, a future capital gains tax free disposal • Start-ups and growing companies can attract further funding for IP development under these schemes Development Phase • R&D enhanced tax relief – one of the most generous tax reliefs in the UK tax code • 225% uplift on qualifying R&D costs for SMEs. 130% uplift for Large companies • Reduced profits subject to tax for profitable companies / tax credit payments for loss-making companies • Qualifying companies need to be seeking to solve technical uncertainties – cross-over with patents….? But what tax incentive support available post Development Phase….? ip tax solutions
  6. 6. PATENT BOX – COMPLETES THE INNOVATION LIFECYCLE • Came into effect from 1 April 2013 10% • Provides a beneficial rate of corporation tax of 10% (v standard rate of 20%) • Beneficial corporation tax rate applies to worldwide profits derived from qualifying patent income • Reduced rate of corporation tax is phased in – 10% rate by 1 April 2017 • It is an elective tax incentive which companies claim via their company tax return ip tax solutions
  7. 7. PATENT BOX – THE SMALL PRINT • Must be a qualifying patent • Patent must be granted by the IPO, EPO or IP offices of certain accredited EEA States • Can either own or have an exclusive licence to a qualifying patent • Must have developed the patent – often overlooked (especially by the press!) • Further rules for corporate groups ip tax solutions
  8. 8. PATENT BOX PITFALLS • Patents Pending – don’t qualify per se but can carry forward relief to period of grant (6 yrs) • Holding patents – what patents are held and for which products? • Development condition – has it been met? • Groups - additional requirement to ensure ‘active ownership’ • Losses – feasibility study necessary to ensure that electing in / out is right for the company • Licensing arrangements – ensure ‘exclusivity’ test is met. Practicalities and potentially difficult clauses… • M&A – retaining patent box benefits on an acquisition. Plus added benefit for future exit…? • Capturing the data – tracing patents to products and relevant costs on an ongoing basis • Anti avoidance rules – rearranging affairs with one of the main purposes being the avoidance of tax • Calculating the patent box profits – not straightforward. Requires specialist tax input ip tax solutions
  9. 9. PATENT BOX INTRO HITS CHOPPY WATERS… ip tax solutions
  10. 10. WORKING TOGETHER • Patent Box – we as accountants need to work with Patent Attorneys to ensure that our clients have protected what they think they have and to protect new IP • R&D tax credits – our work commences often at an early stage - we need to be introducing you (and vice versa) • SEIS / EIS – as above, there are synergies around ip protection and relevant tax incentives • Patent Box forces accountants / tax advisors and Patent Attorneys together yet we probably should have been working more closely for the past twenty years (when R&D tax incentives were introduced) • Reminds me of the oak tree story…. ip tax solutions
  11. 11. ANY QUESTIONS? Steve Livingston LLB FCA Director IP Tax Solutions Ltd innovation tax specialists | Patent Box | R&D Tax Credits | SEIS / EIS | IP Tax Planning T: 0161 961 0096 M: 0791 717 3753 E: ip tax solutions