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Effect of the rise in corporation tax on companies’ use of intellectual property

Fuelling demand

Key points

  • Companies have to deal with a less generous R&D scheme and a corporation tax rise to 25%.
  • Patent box relief reduced a company’s corporation tax rate on qualifying intellectual property profits to an effective rate of 10%.
  • The R&D and patent box regimes should work together to incentivise a company’s full innovation lifecycle.

The recent rise in corporation tax makes patent box relief relatively more generous for innovative companies looking to commercialise their intellectual property. However the rebalancing of research and development (R&D) tax relief to favour larger businesses could discourage R&D investment by small and medium sized enterprises (SMEs) reducing the number of companies generating profitable intellectual property in the future and ultimately diminishing returns for the UK economy.

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