Business tax reform

Supporting detail:

Innovation and investment

Patent Box

The Patent Box was set out in the Corporation tax road map and confirmed in the 2010 Budget to encourage innovative businesses to invest in the UK and to improve the competitiveness of the UK tax system for high-tech companies.

It gives a reduced 10% rate of corporation tax on profits from patents. It came into effect in April 2013, and is being phased in over 5 years.

New international rules around patent boxes and other preferential intellectual property (IP) regimes are currently being discussed in the OECD. The intention is to reach an agreement on these during 2015, so that they can be introduced from July 2016.

Research and development tax credits

We believe that research and development (R&D) tax credits play an important role in supporting innovation in the UK.

At Budget 2011, we made changes to simplify the scheme, remove barriers to early-stage companies and start-ups claiming the credit, and provide greater certainty on the costs qualifying for relief.

Following consultations with a number of large companies on R&D tax reliefs we announced at autumn statement 2011 an ‘above the line’ credit to provide a £250 million per year boost for companies.

At Budget 2013 we announced the credit would be available at 10 per cent. This came into effect in April 2013.

This increases the visibility of R&D relief, and improve finances and cash flow for companies with no corporation tax liability.

At Autumn Statement 2014, we announced that from April 2015 we would increase the rate of the ‘above the line’ credit from 10% to 11%. We also announced we will introduce an advanced assurance scheme for small companies making their first claim, and develop new guidance.

Around 2,450 companies will benefit from the relief.

Tax reliefs for creative industries

The UK is a world leader in the creative industries. To make sure that UK businesses receive the right support to maintain this status, we’ve announced tax reliefs for these sectors.

Relief for animation and high-end television industries came into effect in April 2013, with video games following in April 2014.

At Autumn Statement 2013, we announced plans to introduce a new support for theatres from April 2015 that recognises the unique value that the theatre sector brings to the UK economy.

At Autumn Statement 2014 we announced plans to extend support to orchestras and children’s television.

Helping companies invest in plant and machinery

At Autumn statement 2012 we announced an increase in the annual investment allowance from £25,000 to £250,000 for two years from January 2013.

At Budget 2014, we doubled this again to £500,000 from April 2014 until 1 January 2016, to further support businesses investing.

The annual investment allowance gives firms 100% allowance on investment in qualifying plant and machinery up to its threshold. At £500,000 this covers the total qualifying investment of over 99% of firms, or 4.9 million businesses.