--- title: UK Authorities issue draft legislation for new patent box rules description: The Consultation on the new patent box rules ended on 4th December 2015, and the UK tax authorities have now issued their draft legislation. image: https://blog.shorts.uk.com/hubfs/Images/Brick%20wall%20images/David%20Robinson.jpg --- [![Shorts_logo_White](https://blog.shorts.uk.com/hubfs/New%20Site%202018/Shorts_logo_White.svg "Shorts_logo_White")](https://www.shorts.uk.com/) [Blogs & News](https://blog.shorts.uk.com/) > [RADIUS - R&D Tax Relief & Patent Box](https://blog.shorts.uk.com/topic/radius-rd-tax-relief-patent-box) # UK Authorities issue draft legislation for new patent box rules David Robinson - 7 January 2016 ###### Select topic - Please Select - [ Audit ](https://blog.shorts.uk.com/topic/audit) [ Business Taxes ](https://blog.shorts.uk.com/topic/business-taxes) [ Radius – R&D Tax Relief & Patent Box ](https://blog.shorts.uk.com/topic/radius-rd-tax-relief-patent-box) [ Corporate Finance ](https://blog.shorts.uk.com/topic/corporate-finance) [ GENUS Management Accounts ](https://blog.shorts.uk.com/topic/genus-management-accounts) [ VAT ](https://blog.shorts.uk.com/topic/vat) [ Private Client ](https://blog.shorts.uk.com/topic/private-client) [ Payroll ](https://blog.shorts.uk.com/topic/payroll) [ EOT ](https://blog.shorts.uk.com/topic/eot) [ International Taxes ](https://blog.shorts.uk.com/topic/international-taxes) ![featured image](https://blog.shorts.uk.com/hubfs/Images/Brick%20wall%20images/David%20Robinson.jpg) ###### The Consultation on the new patent box rules ended on 4th December 2015, and the UK tax authorities have now issued their draft legislation. Although the legislation for patent box is in draft, and subject to change, in practice, the final rules are likely to be similar to those set in the draft legislation (which can be found [here](https://www.gov.uk/government/publications/corporation-tax-patent-box-compliance-with-new-international-rules)). The key change is that for a company to benefit from the patent box regime, it must have been involved in the R&D that led to the development of the intellectual property (IP).  This is known as the “nexus” approach.   The rest of the patent box rules remain relatively unchanged. Under the new rules, the proportion of patent box profits that can be included in the patent box calculation will depend on a so called “R&D fraction”.  This must be calculated for each type of IP, and will be based on the following formula: ###### (in house R&D costs + Subcontracted R&D costs) x 130% ###### =    ________________________________________________________________________________________ ###### (in house R&D costs + Subcontracted R&D costs + cost of acquiring IP + R&D costs incurred by a connected company) Irrespective of whether the new or old rules are followed, from 1 July 2016 companies will need to track their R&D costs, and allocate them to a specific IP project.  This will result in an added administrative burden for many businesses, compared to the previous regime. Companies with IP that qualifies for the old regime can continue to use the existing patent box rules until 2021, when the old regime will close completely.  However, the new rules will apply to new qualifying IP acquired or registered after 30 June 2016, or for companies with existing IP that choose to apply the new rules. The R&D costs included in the above calculation will need to be on a cumulative basis, and tracked over a period of 15 years.  However, there are transitional rules for companies that do not have this historical information, to allow them to access the new regime whilst they build up their records.The fraction (which cannot be greater than 1) is then multiplied by the patent box profit, which will need to be determined using the streaming method under the new rules. There is a lot to take in under the new rules, and we will be considering what this means for companies in practice in our next article. However, in the meantime, if you would like to understand more about what this means for your business and arrange your [free consultation](https://info.shorts.uk.com/research-and-development-tax-relief), please don’t hesitate to [get in touch](https://info.shorts.uk.com/research-and-development-tax-relief). 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Get in touch with us](https://www.shorts.uk.com/contact/) ###### Tax Saving Guide 2026-27 Written especially for entrepreneurs and owner-managed businesses, this guide is full of planning ideas and tax risks to avoid. 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