Despite recent scrutiny, no changes are being proposed to the Patent Box regime which comes into force from 1 April 2013.
The Patent Box regime is elective, and broadly allows companies to apply a 10% corporation tax rate to profits attributed to patent income, including profits from the sale of products deriving their value from patents. The Patent Box relief will be phased-in over a 4 year period, with 60% of the relief available in 2013-14 rising by 10% each year until the full relief is available from April 2017. Companies can use the Patent Box regime and continue claiming R&D tax credits.
Above the line (ATL) R&D credit for large companies
From 1 April 2013, large companies will be able to offset R&D costs at a rate of 10% before tax. The ATL credit will be introduced alongside the existing large companies R&D tax relief and will fully replace this in April 2016.
The new credit is payable to a company regardless of its tax position so large companies with tax losses can secure a cash contribution towards their R&D costs. The rationale for the introduction of the ATL credit is that it makes the UK a more attractive location for large company R&D activity by further reducing the after tax cost of investment.
Seed Enterprise Investment Scheme
The Government is providing a limited extension of the capital gains tax holiday to encourage investment in early stage companies. Any investors making capital gains in 2013-2014 will receive a 50% capital gains tax relief when they reinvest those gains into seed companies in either 2013-2014 or 2014-2016.
- Abolition of Stamp Tax on shares quoted on growth markets such as the Alternative Investment Market (AIM) and the ISDX Growth Market. It is intended that this legislation will be introduced in April 2014.
- Corporation Tax the rate will be reduced to 20% from April 2015, this harmonises the main and small profits rate of tax. This makes the UK’s tax rate the lowest in the G20.
- Income Tax the personal allowance will be increased to £10,000 in 2014-2015.
- Business Research the VAT exemption for research between two eligible bodies (such as Government bodies, universities or charities) is to be withdrawn on 1 August 2013 following its challenge from the European Commission. The consultation period on this legislation has now closed.