The IP wonders of the UK Budget

The good stuff:

• R&D tax relief increased for SMEs to 200% in 2011 and 225% in 2012 - excellent news, assuming that the EU don't demand something significant in return (because the SME relief is a State Aid)
• R&D tax credit repayment no longer restricted by PAYE/NICs - more money back to loss-making SMEs, but don't celebrate too much as the repayment is likely to be restricted with the reduction in small companies' tax rate
• R&D large company relief to include sub-contractor costs - good news, particularly for SMEs that can only claim the large company relief (eg: because they've received a State Aid grant for the R&D project)
• Minimum qualifying spend removed from R&D relief - nice idea but, if you're spending less than £10k on R&D in any one year, the costs of getting the R&D claim in order will probably be more than the relief you get!
• Patent box to have more consultation – but still 10%, still patents only, applying from 1 April 2013 - next consultation paper due May 2011
• The exemption for IP holding controlled foreign companies with minimal UK connection will be in Finance Bill 2011, as expected - no changes (yet) announced following the consultation.

The not-so-good bit:

• Vaccine research relief for SMEs reduced to 20% for 2011-12, and then scrapped from 1 April 2012 - but only 10 companies a year claim this relief, so it's not likely to have much impact

Non-IP specialist stuff, but still interesting for IP companies:

• Reductions in corporate tax rate - to 20% for small companies in 2011, to 23% for large companies by 2014 - useful to all companies
• Improvements to reliefs for investors (EIS for individuals, VCT for companies) - may make it marginally easier for companies to raise funds
• Capital allowances (tax deduction for buying equipment) for short-life assets doubled – accelerates tax deduction for assets which will be sold/scrapped within eight years of purchase (but note there are better deductions for R&D assets, and for the first £25,000 expenditure on assets in any one year)
• Enterprise Zones could be attractive - 100% reduction in business rates, some increased tax deductions for asset purchases - and there'll be one in London
• £100m on facilities for "commercialisation of research" (echoes of the need to commercialise patents for the patent box), accommodation for innovative SMEs (probably means patent-seeking) and new research capabilities (no, I don't know what that means either)
• A "new" technology and innovation centre for high value manufacturing - by "new", the Government means integrating the activities of various existing centres
• 24 new University Technical Colleges to be established

These are the UK 2011 Budget key points from an IP perspective - if you want to see the more detailed analysis of these points, and a few others, I've put a more tax-focussed analysis up on IP Tax.

Tomorrow's UK budget

Tomorrow UK tax-payers of all types will be turning their attention to the Chancellor, George Osborne, who will be presenting his 2011 Budget. This year the emphasis is likely to be on tackling the UK's not insubstantial budget deficit, not to mention tax avoidance, while simultaneously delivering on promises of stability and simplicity.

The Government is expected to confirm the outcome of several consultations on tax reform proposals -- including the review of tax reliefs and the reform of the corporation tax system. The IP Finance Blog is particularly keen to see whether there will be any announcements in relation to R&D tax credits and whether further details of the patent box will be set out following the consultation which closed last month.

This member of the IP Finance team will be following developments on Olswang LLP's Budget Blog here for the latest developments. IP buffs will also be keeping an eye on Anne Fairpo's Intellectual Property Tax blog, here.