What is Patent Box?
The current Patent Box scheme was introduced in April 2013 and allows UK companies to pay a reduced rate of UK corporation tax on worldwide profits earned on patented products. A single UK (or other European) patent is all that is required to obtain relief on worldwide profits.
The rate of relief is being phased in with the full relief being available from 2017 when corporation tax paid under the scheme will reduce to 10% (compared to the current full rate of 19%).
What is changing?
The current scheme will continue to operate until 30 June 2021, but is closing to new entrants from 1 July 2016.
A new scheme is due to be introduced from 1 July 2016. Details of the new scheme are not yet available, but what is certain is that it will be less favourable than the current scheme.
It is proposed that patents will qualify for the existing scheme if they have a filing or priority date prior to 1 July 2016. However, anti-avoidance measures will exclude any IP acquired from a related party after 1 January 2016 (unless that IP already qualifies for benefits under the existing scheme).
How do I take advantage of the current scheme?
- Move IP by 1 January 2016. Complete any transfer of IP that you may wish to rely on from a related party (such as a group company) by 1 January 2016.
- File new patent applications by 30 June 2016. Any contemplated new patent applications should be filed by 30 June 2016.
- Accelerate existing patent applications. Whilst relief should be able to be claimed in relation to any patent applied for before, but granted after, 30 June 2016 it is more certain that relief will be available for patents granted before 20 June 2016. So, where possible, consider accelerating currently pending patent applications to obtain grant before 30 June 2016.
- Opt in by 30 June 2016. If you have a patent or application, or exclusive licence under a patent or application, that you intend to rely on to obtain relief under Patent Box and have not already done so, contact your tax office to opt into the current scheme by 30 June 2016.
For further information on how you can take advantage of the current Patent Box tax scheme, contact James Robey or your usual Wilson Gunn advisor.