Tax incentives for innovation
Presentation
R&D
Tax relief on the costs of innovation
Patent Box
Tax relief on the profits of innovation
Simon Briton, Clive Owen & Co llp
June 2012
R&D tax reliefs
What Is R&D?
•
An advance in science or technology
•
Science means physical sciences – not social sciences or mathematics
•
An advance in the global state of knowledge
•
£10,000 minimum spend
•
Must own IP resulting from R&D
What is the tax break?
SMEs
•
Taxable profits are reduced by 225% of qualifying costs
• Eg £10,000 R&D costs reduce tax bill by £4,500*
•
Sell R&D tax losses to HMRC for 11%
• £10,000 R&D costs = £22,500 tax loss = £2,475 cash payment
*assuming 20% corporation tax rate
100% R&D
capital
allowance
Capital
expenditure
Companies
carrying on R&D
activities
R&D superdeduction
175% / 200%
/ 225%
SME
Revenue
expenditure
Grant funded
project
Large company
Surrender
loss? 11%
R&D superdeduction
130%
Qualifying Expenditure
•
Staff costs – includes pension contributions but not other benefits (e.g
company cars)
•
Software, consumables, heat, light, etc
•
Subcontractor costs (at 65%)
•
Payments to clinical trials volunteers
•
Scientific and technical information services
•
Ancillary services – e.g. maintaining R&D equipment
•
Feasibility studies
R&D Capital Allowances
•
R&D tax credits cover expenditure that is revenue for tax purposes
•
Certain expenditure capitalised for accounting purposes may be
treated of revenue for R&D tax credit purposes
•
Otherwise 100% capital allowances on anything but land
•
The last tax relief for acquisition of a building
Patent Box
What is the tax break?
•
Pay tax at 10% on profits
• rather than 20% - 25%
•
Scheduled to come into force from 1 April 2013
Qualifying Patents
•
Issued by the Intellectual Property Office (IPO) in the UK and the
European Patent Office (EPO)
•
Also covers Supplementary Protection Certificates, regulatory data
protection and plant variety rights
•
Other EU patents will be brought in
•
US patents will not
Who Is It For?
•
Companies only (like R&D)
•
Must hold qualifying patent / exclusive licence
•
•
•
•
UK / EU / comparable patent (not USA)
First commercialised after 29 November 2010
Must have significantly contributed to the R&D
Must maintain R&D activity – 75% of entry level R&D for 4 years
What Goes Into The Patent Box?
•
Royalties and licence fees
•
Proceeds of patent sales
•
Sale of products including patented parts
•
Once a patent is granted there is a six year look back in which
profits can be brought into the Patent Box
Contact details
Simon Briton
Clive Owen & Co llp
Simon.Briton@cliveowen.com
01325 349 700
The things mentioned in this presentation are for general information purposes and are not intended to be taken as
advice nor should they be relief on without seeking appropriate professional guidance.