From Portal Tax to Portaloo? Relief may be in the offing ...

"Solicitors could claim back tens of thousands of pounds in tax using capital allowances, but must do it by April 2014" is the exciting title of a circular which this blogger has recently received from Portal Tax. From this release, it appears that

If your practice isn't
flush for cash, why
let the taxman get it? 

" ... The [UK] 2012 Finance Bill [which appears to have been an Act since June 2012] introduced a transitional period which runs until April 2014. If a commercial property is sold within this period then it can be treated in the same way it would have been previously. Before April 2012 you could choose when, and whether, you made a capital allowances claim on your business. The owner does not have to make a claim for capital allowances before he/she concludes the transaction, but they will have to agree to the fixed value requirement within 2 years. The next time the property is sold, even if it is the very next day, then the new rules apply and capital allowances must be considered as if it were post April 2014.

If the current owner acts now they can claim the full capital allowances back for themselves. If they do nothing, a future owner of the property may benefit instead. Portal Tax has helped businesses to maximise any capital allowance claims on their commercial property - on average, £105,000 for each business in outstanding capital allowance for items ranging from fire alarm systems, to heating, to air conditioning.

Data compiled by Portal Tax has revealed the top ten items by volume on which tax has been claimed back.

1 Ironmongery (including closers, latches, locks, etc)

2 Sanitary ware (including WCs [no doubt providing relief in more than one sense of the word ...], basins, second fix pipework etc.)

3 Power, Data and Lighting Fittings (including sockets, switches etc.)

4 Floor Finishes (including carpet, vinyl sheet etc.)

5 Hot and Cold Water Equipment (including pipework, tanks etc.)

6 Signage

7 Wall Finishes (such as ceramic tile splashbacks)

8 Fire, Communication and Security Systems (such as alarms, cameras, other equipment)

9 Heating, Cooling and Ventilation systems (including air conditioning, radiators, boilers etc.)

10 Workplace Lighting (usage dependent)

Portal Tax estimates that 96% of businesses that own their own properties, or commercial property owners, could be owed a refund. ... In one case allowances worth as much as 68% of the purchase price were found. ...”

There's nothing to suggest that these attractions and advantages are open to solicitors only; one rather hopes and imagines that patent and trade mark attorneys, IP consultants, innovation gurus and the like would equally qualify for these tax breaks.  There may be a considerable number of readers of this blog who own and may be disposing of their work premises, particularly those who work at home or in that cosy shed at the bottom of the garden.  They may also be deterred from maximising their tax efficiency for any number of reasons, including

• the cost of their accountant's services
• inability to understand more than about one word in every ten that their accountant says to them
• time spent dealing with accountants is time spent not dealing with clients
• the cost of complying with the accountant's insatiable demand for miscellaneous pieces of paper and information before they can even find out whether the tax relief adds up to more than whatever their accountant charges them
• the nervous strain, tension, pain and suffering of having to deal with their accountant

and so on.  But seriously, if there is any benefit to be derived, this avenue of relief is surely worth exploring.

Patent Box

No No not a patent storage box

HM Treasury have recently announced a further consultation on the plan to introduce a *patent box* to allow companies taxed in the UK to reduce their corporation tax liability to 10% on profits arising from patent exploitation. When first announced this was only going to affect licence income for new patents and I suspect most of the patent profession ignored it as yet another empty political gesture - which it was.

The plan today is however very different and now that it covers the embedded income generated by an an innovative business making a profit, it does seem to have the real potential to encourage innovation and the exploitation of patented technology.


It is definitely worth bringing to the attention of your clients. It seems to me that we should also be looking at cooperating with accountants. The consultation is being led by the Treasury with the support of a working group consisting of a number of large patent holding businesses. No doubt they have accountancy teams well able to work out the complex calculations needed to claim this tax relief. To be fair to the Treasury, the approach is delightfully formulaic and probably doesn't require too much academic flair.
However, the truly interesting question is going to be assessing whether there has been  incorporation of the patented invention into the product that is generating the profits. Definitely a role for the patent attorney. Sadly, we have all seen the business that files a patent but sells a product outside the scope of that patent.

Another real issue that I think we need to address is that the proposal is that a patent will qualify for the patent box in full from the date of grant. You can use the UK and EP patent. This is certainly going to create a much greater demand for the early grant of national UK patents and we need to be on to it now. I have long been an advocate of the combined search and examination procedure which results in both early grant and enough information to decide whether PCT and other foreign patent protection is justified. Of course, it's not that often a patented product generates much profit in its very early years. That, surely, is the point of the patent. The innovative company needs the patent to secure a longer term monopoly in order to make a profit. Now, the government proposes to allow innovative companies to keep a good deal more of that profit. Nice.

The period for response to the consultation expires on second of September 2001. However, if you want to be in on the working group nominations for additional members should be sent to corporatetaxreform@hmtreasury.gsi.gov.uk by 24 June 2011.

A Vote for Entrepreneurship

In the UK we are in the midst of an election. On Thursday each of us may choose to vote. There are always a multitude of factors that go into that decision. Due to the prominence of the TV Leaders debates and the national coverage many may choose to vote for a party. However others may focus on the choice in their constituency. Much has been left unsaid in this campaign about how the new government will govern and create an environment in which business can flourish or not.

For my clients who are running businesses or thinking of starting one, my fervent hope is a tax and regulatory system that is simple and clear. Tax tends to get more complex and elaborate as politicians tinker with it. Tax Lawyers are much too blame too for creating devious schemes. One of the advantages of not being in big law is that I can say that without fear of retribution from partners who do just that.

The Liberal Democrat policy looked quite neat £10k clear of tax and then everything at income tax rates. Sadly it seems that they believe the gain you make on selling your business - taxed under Capital Gains Tax (CGT) will also be at these rates and the allowance may be within that £10k. Its a sensitive matter and it does not win votes to clarify it now. However beware that this could be a problem for you. Now 'tis true that private equity barons did get into a bit of hot water by having all their income taxed as CGT. The Labour Government increased the rate from 10 to 18% but also introduced an Entrepreneurs relief which in the March 2010 budget rose to £2million. This would indeed radically re balance the tax system. Unfortunately in a direction that is rather depressing to business owners and some of those are going to be growing the economy, which is essential.

Its by no means clear what the Conservatives will do. No promises in their Contract with us. They are likely to look at CGT as a source of income generation. They have no commitment to Entrepreneurs relief and one suspects that rise to £2million was made to be slashed by an incoming opposition and provide a Labour opposition with some nice points at Question Time.

My plaintive tweeting  over the last few weeks has gone largely unnoticed but I have seem that the Business Leaders Network has seen the issue here. OK these big investors may stand to lose a lot. Sadly so do more modest businessmen.

After the Election there will be little inclination for the government funded schemes that deliver few results and this is probably right. We will all have to contribute to reducing the deficit. High earners will be paying more tax but if you cannot save to enjoy retirement then the NHS had better be good as we and our clients will need to work till we die and England is not as warm a place as Greece in which to do that.


The photograph was taken by me in Athens Greece. You can copy it if you like.

New European VAT Rules

One of the challenges for the SOLO IP practitioner based in the United Kingdom is dealing with your VAT returns. As from 1 January 2010 we have to change the rate of VAT on our bills from 15 back to 17.5%. However that is not all that affects us. IP is a global business so hopefully you have a few non-UK based clients. Since the provision of patent and trademark services is a "service" not a "good", it used to be pretty simple. No VAT for overseas clients and you could forget that strange thing an EC Sales List (ESL). No longer. Within 14 days of your next VAT reporting period HMRC want an ESL from you.

Here is the official Notice. For practical purposes this means you need to record the value of services supplied to EU clients but you still do not charge them VAT. You do need to included their VAT number on your invoices and on the ESL. Most of us have that data already. However I have noticed a few of my European suppliers have been asking for my VAT number recently. Its easy to reply as I have my VAT number in my email footer and their VAT numbers in my database.

I have sent my VAT returns online for sometime and it is a lot simpler than paper. I can do the ESL online too and since I have very few European clients, doing it manuallly after the end of the 1st quarter of 2010 is not a big burden. If you have more, then perhaps its time to look at your accounting software and speak to your accountant. If you are not doing it online yet, now is the time to start. Its very simple.

I am hoping for comments on whether you think these changes have more significance than I have appreciated.