10% tax on patent royalties
Good news? Well, yes: but only if you're planning on receiving income from 'innovative industries' (broadly, it's only going to be available for pharmaceutical and biotech patents). This is very much less generous than the similar royalty taxes in the Netherlands, Luxembourg and Belgium - all of which equate to a tax rate of around 6% and are available for a much wider range of IP.
So, good news for smaller business doing research that will lead to pharma/biotech patents - although 10% is higher than the Benelux options, the costs of successfully operating a non-UK company and keeping its profits out of the claws of the UK Revenue could be more than the 4% difference in rates for a small business.
The sting in the tail (because there had to be one): this doesn't come into effect until April 2013, and will only apply to patents granted after that date [Edited to add following comment - the date from which patents will be included isn't clear: April 2013 is the backstop date, it might be earlier. Lobby to make sure it is!]. There is advance publicity, and then there are Budget announcements. Trying to be more positive, there is some time to work on the government (any government!) to expand the scope of this proposal.
R&D relief: ownership requirement removed
Of more general use is the change (effective today) in requirements for small and medium-sized company R&D relief: there is no longer any requirement that the company owns the IP resulting from the R&D. Although HMRC could be flexible on this (eg: for university spin-outs with licences) they have also been very unhelpful in some cases.
I thought that the 10% rule would apply to patents granted after the legislation (Finance Bill 2011) is passed, not April 2013.
It's not wholly clear what the effective patent date would be - consultation is supposed to be done in time for FA 2011 but there is no commitment to put the legislation into FA 2011 - it could be separate legislation. All that's clearly stated is that the reduced rate will apply from April 2013. The good news is that it all does give us plenty of time to try and get HM Treasury to accelerate the timescale and widen the scope!
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