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10 June 2011

Government publishes consultations on Patent Box and R&D credits

The Government has today published consultation documents on the Patent Box and Research and Development (R&D) tax credits as part of it’s plans to make the UK’s tax system the most competitive in the G20 and to make the UK the best place in Europe to start, finance and grow a business.

The Patent Box will apply a 10% corporation tax rate to profits attributed to patents from April 2013.  The document published today consults on detailed proposals for the Patent Box’s implementation, and gives more information about which patents and associated intellectual property types and what income will be eligible.

The proposals published today in the R&D tax credits consultation will further simplify the scheme by, among other things, changing the rules to extend the credit so that the costs of more contract workers qualify. 

The Government is also to pilot a process that will allow small companies and start-ups to find out what projects will qualify for the credit at an early stage in their development to assist in planning.  The Government would like to explore further with companies the evidence base for moving to an ‘above the line’ credit.

David Gauke, Exchequer Secretary to the Treasury, said:

“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. The Patent Box and R&D credits help us create the best possible environment for this.  We welcome responses to both of these consultations from industry and from tax professionals.”

Through both of these measures, the Government aims to support innovation and productivity in the UK and allow companies which further these to prosper.  With the Patent Box, the Government aims to provide an incentive for companies in the UK to retain and commercialise existing patents and to develop new innovative patented products. 

This will encourage groups to locate the high-value jobs associated with the development, manufacture, and exploitation of patents in the UK; and maintain the UK’s position as a world leader in patented technologies.

The R&D tax credits consultation document also includes the Government’s response to its previous consultation on R&D credits, the submissions to which were considered by the Government when putting together the measures announced at Budget 2011.

Notes for Editors

1. The Patent Box consultation document can be found in our consultation area under Consultation on the Patent Box 

2. The consultation closes on 2 September 2011. Responses should be sent to or CT Reform, Corporate Tax Team, HM Treasury, 1 Horse Guard’s Road, London, SW1A 2HQ.

3. The Government’s previous consultation on the Patent Box ran from 29 November 2010 to 22 February 2011. Details can be found in our consultation area under Patent Box.  

4. The R&D tax credits consultation document can be found in our consultation area under Research & Development (R&D) Tax credits: response and further consultation.

5. The consultation closes on 2 September 2011. Responses should be sent to or R&D Tax Credits Reform, Excise and Enterprise Tax Team HM Treasury 1 Horse Guards Rd London SW1A 2HQ.

6. The Government’s previous consultation on R&D tax credits ran from 29 November 2010 to 22 February 2011.  Details can be found in our consultation area under R&D tax credits.

7. By far the most significant response from large companies to the R&D tax credits consultation was a proposal to move from the current superdeduction to a system which reduced the company’s final tax liability, rather than its taxable profits. This was commonly referred to as an ‘above the line’ tax credit system.

Typically, this proposal was also backed up by a proposal that the credit could be offset against other taxes (or ‘payable’ as the SME credit is) where the company did not have sufficient corporation tax to benefit immediately from the credit.

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