The government has announced that legislation will be introduced in the autumn 2010 Finance Bill to correct an unintended anomaly affecting the amount of film tax relief that may be claimed where films are produced over more than one accounting period. The measure will have effect for accounting periods ending on or after 9 December 2009 and will be treated for those periods as always having had effect.

Film tax relief may be claimed by film production companies for films that satisfy the cultural test for being a British film. Where a film production company satisfies the relevant provisions, it may claim an enhanced tax deduction or surrender a loss in return for a payable tax credit. For further detail, see Practice note, Film tax relief.

Where a company claims tax credit over two or more accounting periods, the existing legislation has restricted the losses that may be surrendered for payment in respect of any second or subsequent accounting period in an unintended way where there is an increase in UK spend in the second or later periods.

The new measure was first announced as part of the 2009 Pre-Budget Report (see Legal update, Pre-Budget Report 2009: implications for IP, IT and communications). The June 2010 Budget announcement is virtually identical to that contained in the 2009 Pre-Budget Report. It is therefore expected that the legislation will follow the form of draft legislation published as part of the 2009 Pre-Budget Report.

(See HMRC: June 2010 Budget - BN12 - Film tax relief: multi-year claims.)

The government says that it intends to consult with business to review:

No details are given of this review, so it is unclear exactly how wide-ranging it will be and whether any proposals are already being considered.

(See HM Treasury: June 2010 Budget: Chapter 1, paragraph 1.61.)

The government has confirmed that it will not introduce the proposed landline duty (see Legal update, Government drops landline tax). For details of a number of measures set out in the June 2010 Budget to help to improve broadband in the UK, see Legal update, Budget June 2010: broadband.

(See HM Treasury: June 2010 Budget Report, paragraph 1.84.)

The government has announced that legislation will be included in the autumn 2010 Finance Bill to abolish one of the conditions that an SME must satisfy in order to claim the enhanced tax relief for R&D expenditure.

SMEs may claim an enhanced tax relief at the rate of 175% for qualifying expenditure on R&D. For further detail, see Practice notes, Intangible property: tax: Research and development and R&D tax reliefs: practical aspects.

One of the conditions that an SME must satisfy in order to claim this relief is that the company owns any IP deriving from the R&D to which the expenditure is attributable. The government has announced that this condition will be abolished. The change will have effect for any expenditure incurred by an SME on R&D in an accounting period ending on or after 9 December 2009.

This measure was first announced as part of the 2009 Pre-Budget Report (see Legal update, Pre-Budget Report 2009: implications for IP, IT and communications). The June 2010 Budget announcement is virtually identical to that contained in the 2009 Pre-Budget Report. It is therefore expected that the legislation will follow the form of draft legislation published as part of the 2009 Pre-Budget Report.

(See HMRC: June 2010 Budget - BN08 - Research and development tax relief.)

The government has announced that it will not introduce a tax relief for the UK video-games industry.

As part of the March 2010 Budget statement, the previous government announced that, following consultation, it planned to introduce a tax relief for the UK's video-games industry, subject to state aid approval from the European Commission (see Legal update, Budget 2010: implications for IP, IT and communications). However, as part of the June 2010 Budget, the coalition government has stated that it will not now introduce such a relief.

(See HM Treasury: June 2010 Budget: Chapter 2, paragraph 2.77 and Table 2.1.)

HMRC is to be given the power to amend the rules on when and how individuals and persons other than UK resident companies must report and pay income tax withheld from patent royalties (as well as interest and other annual payments). (For a general discussion of withholding tax, see Practice note, Withholding tax.) Currently, a person other than a UK-resident company required to withhold tax from certain payments (including interest and royalties) must report the payment to HMRC without delay, and they may be assessed to the tax that they are required to withhold (section 963, Income Tax Act 2007). The government intends to legislate in the autumn 2010 Finance Bill to allow HMRC to amend these rules in regulations. However, no details have been provided on the changes that are envisaged.

(See HMRC: June 2010 Budget - BN 13 - Changes to the rules on the deduction of income tax at source.)

Following a proposal in the 2009 Pre-Budget Report, as part of the March 2010 budget the government set out its intention to introduce a 10% corporation tax rate for income from UK patents (referred to as a "Patents Box") from April 2013 (see Legal update, Budget 2010: implications for IP, IT and communications). The previous government planned to consult on a range of issues relating to the scope and operation of the Patents Box during the summer of 2010.

The June 2010 Budget statement does not include any further details on consultation in this area. However, the Patents Box is referred to in a table of measures announced in the March 2010 Budget (or earlier) which will take effect from April 2011 (or later). The Patents Box has been allocated a start date of 2013-14 and a cost of £500 million in 2013-14, rising to £800 million in 2014-15.

(See HM Treasury: June 2010 Budget: Chapter 2, Table 2.4.)