Tax incentive for UK research activity

Originally announced by Alistair Darling in his pre-Budget statement in December 2009, the government has announced a consultation on the so-called ’Patent Box’, which could see royalties and other profits from patented products and technologies being taxed at the lower corporation tax rate of just 10 per cent. A consultation to review research and development tax incentives as a whole has also been promised.

If the plans go ahead, the 10 per cent tax rate will apply from 1 April 2013 and will be applied to patents first commercialised after 29 November 2010.

Adrian Tombling, patent attorney at Withers & Rogers, said: ’The lower rate of corporation tax is likely to be very attractive to all companies with a strong focus on research and development and this will help to secure inward investment in the UK.’

Tombling added that while it was unclear yet what type of patent-related income will qualify for the 10 per cent tax incentive, it is possible that it could extend to cover both royalty income and ’embedded’ income - other income from a product that can be attributed to the patent. It is also possible that the costs associated with obtaining patents could be brought within the research and development tax incentives scheme.