As you may be aware from press reports at the end of last year, there are changes afoot for the UK Patent Box regime. The regime, which was introduced from 1 April 2013, provides a reduced rate of corporation tax of 10% on certain profits derived from patents and whilst the rules around the Patent Box are complex, the potential benefits for qualifying companies are significant, especially when considered over the life of the patent. Although the detail of the proposed changes is yet to be determined, the announcement that the Patent Box regime will continue in some form provides certainty for those innovative companies seeking tax relief and is to be welcomed.
It is anticipated that the new regime will restrict the Patent Box relief based on the amount of Research and Development work which gives rise to the patent undertaken in the UK as compared to elsewhere. The legislative process to develop this proposal will commence later in 2015 and the Government intends to consult on the changes.
To implement the new regime, the existing regime must be closed to new entrants by 30 June 2016 and abolished entirely by 30 June 2021.
The amendments, announced by David Gauke, the Financial Secretary to the Treasury on 2 December 2014, arise partly due to pressure put on the UK from other G20 countries and also as a result of the Organisation for Economic Co-operation and Development (OECD) reviewing such intellectual property regimes. The OECD review produced a number of options which would ensure that a favourable IP regime was not ‘harmful’ and whilst the UK favoured the ‘transfer pricing’ approach, the majority of the G20, including Germany, preferred a ‘modified nexus approach’. In the interests of reaching an agreement, the UK and Germany issued a joint statement outlining a compromise proposal which adopts most of the features of a modified nexus approach, amended to take account of previously expressed UK concerns.
Clearly there is some uncertainty over the exact format of the regime over the long term, however the fact that the Patent Box in its current form is set to continue until 30 June 2016 (and potentially 30 June 2021), means that we would strongly recommend that if your company has patents, or intellectual property which may be capable of being patented, you contact us to review your eligibility as soon as possible.
To arrange your free consultation, please do not hesitate to contact us.
