The new announcements on patent taxes will make innovation more possible in the Britain of tomorrow.
The Pre-Budget report presented by Alistair Darling featured a new lower rate of corporate tax for income which stems from patents in the UK. This measure was designed to spur the biotechnology and pharmaceutical sectors and already GlaxoSmithKline (GSK) has announced it will spend £500 million building a new factory and expanding a second one, but it could also cover a wide range of industries.
Currently, the Corporation tax stands at 28 per cent. However, tax rates for companies earning income on their own intellectual property could fall to just 10 per cent by 2013. The effort is designed to specifically target large organisations operating in European nations with similar patent tax options.
Many of the bigger pharmaceutical companies, which do employ huge amounts of people, have huge bases in mainland Europe, partly because of the patent tax rules. Hopefully, other companies, such as aeronautical or manufacturing companies, will also use the UK as a base for just this reason.
But small companies could also benefit and the new tax break could help out the backyard inventors. Inventors would be able to push their inventions and ideas but also be able to invest more money into their business rather than losing it all into tax. This means more jobs, more investment and more innovation.
However, this patent tax may create a few problems. It could give rise to companies that purely purchase intellectual property and patents off small businesses, by either trampling them or by enveloping smaller companies into the larger entity. That isn’t so much a problem, but there will be some companies that will do this without any particular intention of harnessing the patents.
They could either simply try to sell these patents off at a higher price to bidders, or they could be planning to act as patent trolls. A patent troll is a pejorative name for a company that enforces patent rights against infringers in an overly aggressive manner and often generally, they have no intention of making or marketing the patented invention.
Opponents claim that patent trolls discourage innovation and prevent market growth. However, the term can be deceptive; small innovative companies are often trampled underfoot by the legal teams of large corporates who try and keep them in court until they go bust or pay them off with a fraction of what they could earn.
However, the ultimate aim is to make the UK a nation of innovation once again. Under Darling’s plan, there should hopefully be plenty more British Nobel Prize winners in the years to come.
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8 Responses to “Making Britain an innovation nation”
Thomas Fairfax
Whilst the idea is a step forward, I can see a potential problem.
I work for a company with global that has global R&D centres including in the UK.
What proportion of a cars components has to be covered by a homegrown patent or patents for the UK entity to qualify for 10% corporation tax?
This has the potential to reduce UK manufacturing costs significantly, which is more than welcome. (But has Alistair Darling really calculated the step change drop in corporation tax receipts that would come from much of the manufacturing sector.)
(Trifle worrying that yet again a LFF contributor, supposedy an expert on tech if this site really is fact based, seems to have a poor grasp of what R&D is done in this country. It isn’t just biotech/pharma or people in sheds. By the way a semiconductor plant costs between $1billion ~$2billion to build and equip. Hyundai and Siemens closed theirs nearly a decade ago. Outfits like ARM don’t make their own products anywhere. Would their huge R&D effort be supported by this change? Also I wouldn’t get too excited about GSK potentially making an investment that is smaller than a number of car company vehicle model developments. Welcome as it is, and I certainly wouldn’t say no to it.)
Free tip. You guys could do a lot worse than building up some background knowledge from checking out tech nesw sites such as ‘theregister’. Not sure if there is a pharma/biotech equivilent, but it tends to cover these fields occassionally.
Balham Bugle
Will the new policy be as successful as Brown’s pet scheme, R&D tax credits, which have driven Business R&D in England from 1.5% of GVA to 1.5% of GVA?
martin owen
Making Britain an innovation nation: http://bit.ly/5yy9Ba