News Item
Pre-Budget Report 2009: a boost to UK innovation
10 December 2009
- Enterprise rewarded in patent tax break
- £120m pledged to low carbon technology
As part of his Pre-Budget Report, the Chancellor announced a new lower rate of corporation tax to income generated from patents, in a move designed to boost R&D industries. A consultation is to follow with the legislation to be enacted in the Finance Bill 2011, and to apply from April 2013.
Keith Hodkinson, Chairman of Marks & Clerk, comments:
“Yesterday’s announcement is entirely welcome, and long overdue. Similar tax breaks have been deployed elsewhere internationally, and the UK was starting to look increasingly uncompetitive despite all the rhetoric of building a new economy based on enterprise and worthy of the information age.
“The devil will, of course, be in the detail and it is vital that the scope of the measure is sufficiently wide to be of real benefit. The key issue will be the definition of income from patents and whether this is defined narrowly in terms of royalties and licensing, or more widely to include business revenues generated from products protected by patents. The Pre-Budget Report states that the new lower rate will only apply in respect of patents granted after the legislation is enacted in the Finance Bill 2011. In reality, this will apply to any applications filed from now, and even have a retrospective impact, as it typically takes at least three years for a patent application to be granted. The payoff may come down the line for businesses themselves, but this is nonetheless an encouraging move to incentivise R&D.
“Considering that we are advancing an “ideas economy”, it is disappointing, however, that it is proposed that the new lower rate will only apply to income generated from patents, rather than including other forms of intellectual property protection. Many of our creative industries are protected by IPR such as copyright and design rights, which require significant investment. Our software and games industries need to be kept tax competitive just as much as traditional patent-heavy industries such as pharmaceuticals.”
£120m pledged to low carbon investment
The Chancellor also announced increased support for innovative industries, committing £120 million to the development of low-carbon technology. This will include new manufacturing and testing facilities for offshore wind; a large-scale trial of smart grid technologies; and support to improve energy use in the chemicals industry. This follows in the wake of previous attempts by the Government to boost enterprise, including the creation of a Strategic Investment Fund.
Keith Hodkinson comments:
“While yesterday’s investment is to be welcomed, it needs to have far more reaching effects than the Strategic Investment Fund, and reward innovation amongst large and small companies alike. To date, the beneficiaries of the Government’s Strategic Investment Fund have been those organisations running large-scale projects. Only £5 million from the existing Strategic Investment Fund will be allocated to open competition in key areas for innovative development, while £45 million still remains to be allocated at all. It would be good to see stronger commitment by the Chancellor to the SME sector, and for the Government to really get into the heart and soul of backing and advancing SME technologies.
“In moving forward with yesterday's £120m low carbon investment, it is imperative that the Government concentrates its resources in the vital area of new energy generation. Targeting funding in areas where the UK is yet to make a name for itself is essential in migrating to the hi-tech manufacture our economy so badly needs.”
For more information, contact your usual Marks & Clerk attorney.