I recently overheard someone use the expression \u201cbe careful of what you wish for\u201d.<\/p>\n
From a tax practitioner\u2019s perspective it reminded me of the recent kafuffle about the extent that the public should keep receipts for all cash payments.\u00a0 We had the Labour Shadow Business Secretary, David Gauke, Ed Balls, David Cameron and a host of others wading in with their views.\u00a0 It all died a death as quickly as it arose.\u00a0 The sting in the tail was that of course certain MPs have claimed reimbursement of expenses without receipts.<\/p>\n
The above isn\u2019t the only recent situation where the powers that be could have been careful of what they wished for.<\/p>\n
In the international tax arena the UK Government has been championing the Base Erosion and Profit Shifting project (BEPS).\u00a0 This seeks to provide consistency amongst countries as to the tax treatment of international profits and costs.\u00a0 Its aim is to prevent artificial diversion of profit into, typically, low tax jurisdictions.\u00a0 Broadly it does so by seeking to correlate the profits received by a country with the commercial effort that country puts towards generating them.\u00a0 Although this is a worthwhile project, it had the knock on effect that the UK had to consider its own patent box regulations.\u00a0 Patent box is the legislation which provides a lower rate of corporation tax on certain profits.\u00a0 It is created in a way that acts as an incentive for research and development to be undertaken.\u00a0 It targets highly mobile capital and provides an incentive for that capital to be attracted to the UK.\u00a0 The logic being that the capital results in highly skilled employment in the UK and therefore creates jobs here.\u00a0 Patent box is not a concept unique to the UK as many of our European neighbours have similar legislation.\u00a0 Each countries\u2019 implementation differs.<\/p>\n
In the eyes of some of our competitors the difficulty that they had with the UK patent box was the relatively loose correlation between the tax breaks and work being done in the UK.\u00a0 Reverting back to BEPS it could be argued that the correlation was not sufficiently strong to meet the basis on which BEPS is based.<\/p>\n
After discussions with other jurisdictions, notably Germany, the UK Government have confirmed that the existing regime will continue in its current form until 2016 and be abolished by 2021.\u00a0 Depending on the view you take this is either a U-turn or the normal life cycle of a tax incentive.\u00a0 The cynic would suggest the former.<\/p>\n
For those undertaking R&D in the UK, the proposals are unlikely to change their ability to claim the patent box incentives.\u00a0 For those who undertake their research outside the UK, either under UK management or sub-contracting all work to third parties, they may find themselves at a disadvantage after 2016.\u00a0 The conclusion is therefore one needs to maximise claims under the current regime and consider the future structure of their research function once details of the changes are announced.\u00a0 Even though we have a Budget in the next few weeks we must be cognitive that an election is coming up and therefore it may well be that announcements of any variations do not occur until we have certainty of the composition of a future Government.<\/p>\n","protected":false},"excerpt":{"rendered":"
I recently overheard someone use the expression \u201cbe careful of what you wish for\u201d. From a tax practitioner\u2019s perspective it reminded me of the recent kafuffle about the extent that the public should keep receipts for all cash payments.\u00a0 We had the Labour Shadow Business Secretary, David Gauke, Ed Balls, David Cameron and a host[…] <\/p>\n