UK's growth agenda includes tax relief for innovation and IP

• Author: Ian Williams
• Position: Chairman, Campbell Dallas LLP, Scotland
• Pages: 36-37

p. 36 2012 | 5

As part of it s 2012 budget anno uncement , the UK govern ment state d it

would intro duce a new corp oration t ax rate for com panies th at generat e

prot from a pr oduct they have activel y developed and patented. T his pref-

erential t ax regime k nown as Patent B ox will come into e ffect on Ap ril 1,

2013. What are t he benets of this new ta x regime, and what coul d it mean

for the UK economy?

Historically, the UK has had an unsympathetic ta x system in terms of research and

development (R&D) with tax re lief offered on capital expenditure rather tha n for com-

pany incentives to develop new technol ogies and processes. As a result, many com-

panies registered their intell ectual property (IP) in jurisdicti ons outside the UK to have

the resulting income ta xed at more favorable rates. For instance Irela nd offers up to

25 percent tax relief on R&D revenu e and capital expenditure and has a corporation

tax rate of 12.5 percent for trading income derived from R&D.

In 2010, the UK government announced plans to invest over £200 milli on to create

a network of Technology and Innovation Centres to stem this mi gration. The UK is

home to less than one percent of the world’s population, but its scientic commu-

nity produces eight p ercent of the world’s scientic papers, has a c itation share of

12 percent (second only to the US) and over 80 Nobel prizes fo r scientic achieve-

ment. The introduction of these ta x changes is a bold move by the govern ment to

motivate UK companies to utilize the talent th at exists in the country and to fur ther

the work already being done.

The UK is in a prime positio n to maintain and build on its reputati on as a market

leader in R&D. The infrastructu re needed is already in pl ace, and these new govern-

ment incentives should he lp convince companies to remain in the UK. Abe rdeen, for

example, with its thriving oil an d gas industry stands to be net greatly from Patent

Box. Companies involved in meetin g the many challenges of de epwater production

in the North Sea are regularly developing new technologies.

The UK is the leading G8 indus trialized country in re search productivit y, with 45

research papers pe r billion pounds of gross dome stic product (GDP), compared to

25 in the US and 15 in Japan. It is also home to four of the world’s top 10 universities.

The government’s tax incentives w ill enable greater collabo ration and increasing

UK’S GROW TH

AGEN DA

includes tax relief for

innovation & IP By Ian Willia ms,Chairman ,

Campbell Dal las LLP, Scotland

Ian Will iams has over 25 ye ars’ experienc e

in the energy s ector, working w ith renewable

energy busin esses and advi sing global

oil servi ce companies on thei r UK and

internation al operations. He i s Chairman of

Campbell Da llas LLP, one of Scotla nd’s leading

independent char tered account ants with cros s-

cultura l oil industr y expertise a nd a strong

presence in the renewable energ y industry.

Photo: Campbell Dallas LLP