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UK Patent Box Regime: Changes Ahead

17th November 2014

For accounting periods beginning on or after 1 April 2013, the Patent Box regime allows companies to elect to apply a reduced rate (as low as 10%) of corporation tax (CT) to profits attributable to qualifying (UK and EU) patents, whether received as a royalty or embedded in the sales price of products. 

This attractive regime and its low CT rate has been met with significant opposition from other EU states, notably Germany.  As part of the OECD’s Base Erosion and Profit Shifting (BEPS) project, the UK and Germany have agreed that the current Patent Box regime will be closed. No new entrants will be permitted after June 2016 and, after allowing for a five year transition period, all tax benefits from the existing tax regime will cease to be available in June 2021.

A new preferential tax regime for intellectual property will be discussed and agreed.  It is likely that the new regime will require that a substantial amount of research and development (R&D) activity is undertaken in the UK, and that the tax relief will be linked to and limited by the value of expenditure on UK R&D.

Does your company have UK or EU patents, or is it applying for them? Reduce your CT bill:  take advantage of the current Patent Box regime.

Please contact Katharine Arthur for further information and advice.

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