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Patent Box and R&D tax credits: consultations

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The Government has published two consultation documents with the stated aim of supporting innovation and productivity in the UK.

The Patent Box will provide an incentive for companies in the UK to retain and commercialise existing patents and develop new, innovative patented products, HM Treasury said. Profits attributed to patents will be taxed at 10% from April 2013.

Proposals to reform tax credits for research and development will ‘further simplify’ the scheme and extend the credit so that the costs of more contract workers qualify for relief.

‘This Government is committed to putting in place the most competitive tax system in the G20 and we particularly want to make the UK an attractive location for innovative industries,’ said David Gauke, Exchequer Secretary to the Treasury. ‘The Patent Box and R&D credits help us create the best possible environment for this.’

Comments on the Patent Box proposals are invited by 2 September, and the government intends to publish draft legislation in the autumn. The Treasury has also invited nominations by 24 June for additional members to its Patent Box working group of representatives from business.

The government has set out its response to comments received on the R&D tax credits consultation published last November, and is inviting comments on specific policy proposals by 2 September.

The proposals include moving from the current ‘superdeduction’ to an ‘above the line’ credit against tax; whether relief for qualifying indirect activities should be retained; relief for ‘routine’ activities by a subcontractor; removal of the PAYE/NICs cap for the payable credit under the SME scheme; and reform of the ‘going concern’ definition.

The Government also proposes to pilot a process allowing small companies and start-ups to find out what projects will qualify for the credit at an early stage in their development, and will explore the case for moving to an ‘above the line’ credit.