Patent royalty tax rates

As reported elsewhere in the readingroom Alistair Darling has changed the tax rate on patent royalties from the standard corporation tax of 28 per cent to 10 er cent yesterday.

Although in the pre-Budget report papers it is predicted the move will cost the government £1.3bn in lost revenue it is a long-range view from Labour.

Such a move is well-placed to enhance the reputation of the UK for intellectual property.

In the pre-Budget report papers it is predicted the move will cost the government £1.3bn in lost revenue but it is a long-range view from Labour.

Intellectual property from R&D, Dr Who to Dyson is surely a key indicator of future applicability, in political speak. The move is competitive against rates in other countries, notably the Netherlands and Ireland.

As with any tax it may be open to manipulation by firms applying for incremental patents on the basis of very little R&D activity in the UK, likely to engender stronger intellectual property rights (IPR) enforcement. It can be seen to favour pharmaceutical giants, but could equally be seen to reward invention at a time when sustainability issues are to the fore.

The lower rate is being argued to provide a big incentive to companies to not move abroad as well as encouraging investment in IPR.

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