UK Patent Box: Tick the box by 2016

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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:

  • The current (more generous) Patent Box regime will be closed to new entrants from June 2016
  • The current Patent Box regime will be phased out by June 2021
  • A new Patent Box (2.0) will be introduced from June 2016 with tighter rules likely around the underlying R&D being carried out in the UK

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)!