Entrepreneurs and economists have praised the Chancellor’s announcement of a new 10 per cent tax on profits from UK or European patents.

Adrian Grey, tax director at professional services firm PwC, calls the new lower tax ‘good news for high technology businesses’, while Patrick King, tax partner at law firm MHA MacIntyre Hudson says, the initiative ‘is key to ensuring manufacturing continues in the UK and could be a very popular decision among SMEs’.

The 10 per cent rate will be available from April 2013, and compares favourably with the standard rates of corporation tax, 20 per cent for profits of over £300,000 and 24 per cent over that level.

Paul Fisher, CEO of deals website Buyometric comments, ‘UK businesses have massively lagged behind their US counterparts in using patents to protect their intellectual property (IP).

‘This legislation will help to encourage businesses located here (and businesses considering relocation to the UK), to use patents to further their commercial interests.’

For some entrepreneurs, the patent box legislation could even provide an incentive to develop IP. Daniel Thomas, founder of spa and hot tub provider Danz says, ‘We have thought many times about designing our own control system for the hot tubs. The 10 per cent deduction announced today may well give us the impetus to get around to doing this.’