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Budget 2009: implications for IP, IT and communications
Practical Law UK Legal Update 9-385-6689 (Approx. 4 pages)
Budget 2009: implications for IP, IT and communications
by PLC IPIT & Communications
| Law stated as at 23 Apr 2009 • United Kingdom |
An update on the implications of the 2009 Budget for IP, IT and communications law.
Speedread
The Chancellor's Budget statement on 22 April 2009 included the announcement of a review of the taxation of intellectual property; measures to clarify the treatment of goodwill within the corporate intangible fixed asset regime; proposals to invest £750 million in high-tech industries; and more details on plans to make broadband internet access available to all households by 2012, as well as a review of the powers and duties of the communications regulator Ofcom.
Review of taxation of intellectual property
The government will review the balance of taxation of innovative activity in the UK, including intellectual property. The review will consider the relative attraction of the UK to global firms when they consider where to locate research and development activity, and the possible impact of any tax reforms on location of investment and employment (and the place where IP assets are held). The government will publish its proposed approach before the 2009 Pre-Budget Report. (See paragraph 4.34 of the Budget Report.)
Corporate intangible fixed asset regime: clarification of treatment of goodwill
The Finance Bill 2009 will include provisions relating to the corporate intangible fixed asset regime. For more detail on the taxation of intangible assets, see Practice note, Intangible property: tax.
The provisions are intended to clarify the existing regime with a view to preventing tax avoidance. Specifically, they will confirm that, for the purposes of the corporate intangible fixed asset regime:
- Intangible assets (such as goodwill) include internally generated assets (such as internally-generated goodwill).
- All goodwill is treated as created in the course of carrying on the business in question. Further, goodwill is treated as created before 1 April 2002 where the business was carried on at any time before 1 April 2002 by the company or a related party (and that otherwise goodwill is treated as created on or after 1 April 2002).
- All assets representing non-qualifying expenditure are subject to the provisions in section 885 of the Corporate Tax Act 2009 (Certain other internally generated assets: time of creation), and that these assets are treated as created before 1 April 2002 where the asset was held by the company (or a related party) at any time before 1 April 2002.
The legislation will have effect on and after 22 April 2009 and will be treated as always having had effect. (See Budget 2009 - BN31 - Corporate intangible fixed asset regime.)
Strategic Investment Fund
The government is to create a new investment fund worth £750 million to support advanced industrial projects of strategic importance. One-third of this sum will be earmarked for low-carbon projects, and £50 million will be allocated to the Technology Strategy Board. (See paragraphs 4.35 and 4.37 of the Budget Report.)
Universal broadband access and review of Ofcom powers
The Budget Report confirms the government's aim that every household should have a basic download speed of 2 megabites per second, which is capable of supporting a wide range of applications. The government intends to finance part of its plans through an estimated underspend on the scheme to help the elderly in the switchover to digital television. (paragraphs 4.37 to 4.40 of the Budget Report). It has also announced a review of Ofcom's powers and duties to ensure that it can strike the right balance between supporting competition and encouraging investment in the communications infrastructure (paragraph 4.41 of the Budget Report). For more information, see Legal update, Government announcement on universal broadband access and review of Ofcom's powers.
Source: BERR press release, 22 April 2009 and 2009 Budget Report.
Main Budget report
For a full summary of all aspects of this year's Budget, see Legal update, Budget 2009: key tax announcements.
Practitioners' comments on the Budget
PLC asked leading tax practitioners what they saw as the key points of interest for businesses in Wednesday's Budget. Click here to read their comments.