The Patent Box is a valuable UK corporation tax relief that aims to incentivise UK companies to invest in knowledge-intensive activities that generate valuable intellectual property that is protected under qualifying patents. The tax break allows companies to benefit from a reduced rate of corporation tax on profits attributable to the qualifying patents.
The Treasury recently announced that it had seen a positive uptake of the Patent Box since its introduction in April 2013, with 639 companies receiving a benefit totalling £335m so far. However, within the same timeframe this tax relief has unfortunately come in for its fair share of ‘stick’ with claims that it is ‘harmful’ and ‘anti-competitive’, especially in the light of the Eurozone. Following OECD discussions, the UK Government is seeking to amend certain provisions within the Patent Box incentive. The changes are being introduced with effect from 1 July 2016 – all is not lost, however, for potential new entrants to the scheme under the current / ‘old’ rules.
The UK Patent Box continues to be a highly valuable tax relief and a useful ‘add-on’ to the R&D tax credit incentive for many companies. The new rules should not impact adversely on many UK SMEs as they are strongly linked with the underlying economic activity which, for most, will be within the UK. There is currently a consultation ongoing that ends on 4 December 2015 – we will keep you posted on developments.
Here we share an interview we carried out with Ean Davies and Simon Bradbury of Appleyard Lees, European Patent and Trademark attorneys.
This interview is intended to be a ‘primer’ for those considering patents as it covers the basics around:
We hope you enjoy it and please leave comments or questions – we may be able to cover in future sessions…
The UK Patent Box regime has been hit by criticism from other EU nations (particularly Germany) since its introduction in April 2013. It looks like George Osborne has finally heeded to pressure at the most recent G20 conference and agreed a compromise agreement to tighten up some of the rules around this attractive UK tax relief.
It appears that the UK Patent Box – currently offering a 10% corporation tax rate on worldwide profits generated from qualifying patents – will be revamped into a new Patent Box incentive that is more closely aligned with the jurisdiction of the underlying economic risk e.g. the underlying R&D activities. There have been concerns that international groups could benefit from the UK Patent Box for intellectual property registered in the UK whilst R&D activities might be carried out in other nation states.
Changes we expect are as follows:
So if you’ve elected into the Patent Box by June 2016, it looks like you will be ‘in’ for a further 5 years whilst new entrants will be barred
We expect to hear more concrete detail in the Autumn Statement on 3 December 2014 but companies should be considering now how they might benefit from the current – more widely drawn – Patent Box regime.
It looks like you have until June 2016 to act – although preparations are likely to be necessary way in advance of this date e.g. if a patent is to be granted (as necessary under the current regime)!