Osborne pledges cuts to patent tax

CHANCELLOR Chancellor George Osborne has announced a drop in corporate tax rate for patents in a bid to encourage businesses to migrate to the UK.

The Chancellor announced a ten percent drop in the current rate to take effect on 2013.

“This Government, unlike the last one, is not going to let our competitiveness leech away and see our corporate tax based undermined,” he said.

He said pharmaceutical giant GlaxoKlineSmith would take advantage of the arrangement with a £500m investment program which will create an estimated 1000 jobs.

updated: 16.22

All patents commercialised after 29 November 2010 will fall under the scheme which is aimed at attracting business to the UK. While the 10% rate is not in line with some of the UK’s competitors, Osborne believes it strikes the right balance between “affordability and competitiveness”.

“The Government wants to provide an effective incentive to create and retain intellectual property in the UK, but believes that it is not necessary to match the rates offered by other countries in order to be competitive, given the significant non-tax strengths of the UK as a location for… development and exploitation,” the Treasury said in its consultation document.

Osborne also announced a review to the tax scheme which provides credits in exchange for investment in government research and development (R&D).

About 8,350 companies claimed an estimated £980 million of support through the schemes which, since their introduction, have supported nearly £52 billion of R&D activity by UK companies.

The government hopes the combination of low corporation tax rates, with the main rate of corporation tax falling to 24 per cent by 2014, and the presence of the R&D tax credit schemes, will make the UK an attractive location for UK companies and multinationals to undertake R&D activity.