Patent box – act now as the window is closing

Since April 2013 UK companies that generate profits from the sale of patented products have been able to benefit from the UK Patent Box, and a reduced headline rate of corporation tax of 10%.

Although there are complex rules determining the level of relief that a company can claim, it has proved to be a valuable relief for many of our clients.

Introduced from 1 April 2013, the rules were phased in over 5 years such that companies could benefit from 60% of the relief from 1 April 2013, 70% from 1 April 2014 and so on, up to 100% from 1 April 2017. This means that a company with a 31 March year end would be able to fully benefit from the regime for the first time during their year ended 31 March 2018.

Although we are still within the phasing-in period, and whilst the rules have only been in force for a relatively short period, there are a number of impending deadlines that companies with patented products should take note of:

1. The deadline for making a claim for patent box relief is 2 years after the end of the accounting period. This means that for periods ending 31 December 2013 or 31 March 2014, the window to make a claim will close on 31 December 2015 and 31 March 2016 respectively. As such, clients should act now to claim relief for these periods.
2. There has been a perception in other EU member states that the UK regime (in its current form) effectively makes the UK a tax haven. As such, in late 2014 the UK and German authorities issued a joint statement which effectively ends the Patent Box in its current form.

This has led to the decision to close the existing regime to new entrants from 30 June 2016.

A new Patent Box regime is proposed for new applications and new patents from 1 July 2016. Although the exact details are not yet known, it is anticipated that the new regime will continue to benefit the majority of our clients. Legislation is expected during 2016, and we will have further detail then.

Whilst the existing favourable patent box regime exists, companies with qualifying patents should act now to lock in whilst they still can. Companies with 31 December and 31 March year ends should act sooner rather than later to claim relief for 2013 and 2014 periods respectively.

Failure to act now could result in the more favourable regime being closed for existing patents, which could lead to lost tax relief.

If you have any questions in respect of patents, or the relief available, please get in touchto arrange your free consultation.