Our partners and attorneys are highly qualified and highly experienced to advise you in all areas of Intellectual Property law. We advise start-ups, SMEs, and multinational corporations and ensure that your inventions, brands and designs are expertly protected.
In order to meet proposals developed by the Organisation for Economic Co-operation and Development (OECD) to harmonise preferential tax regimes operating in G20 states, HM Revenue and Customs have, with HM Treasury, recently opened a consultation on proposed changes to the UK Patent Box scheme.
The consultation is open from 22 October 2015 to 4 December 2015 and can be viewed here. Changes to the current Patent Box rules will then be proposed in the 2016 Finance Bill. Any amendments will be effective from 1 July 2016.
Summary of proposed changes
The primary proposal is that for a business to be entitled to a preferential tax scheme such as the Patent Box, they must have undertaken the substantial activities that generated the income which is to benefit from the regime. Businesses which have acquired IP will not benefit to the same extent.
The “Nexus Approach”
The proposed new Patent Box scheme takes account of a company’s R&D expenditure to determine the proportion of the company’s IP profit which may be included in the Patent Box scheme. This is referred to as the “nexus fraction”.
The “qualifying expenditure”, or numerator, of the fraction will be the company’s own R&D expenditure plus any subcontracted R&D expenditure to an unrelated party. The denominator of the fraction will be the qualifying expenditure plus R&D subcontracted to a related party plus acquisition costs.
The proposed change shifts the benefit of Patent Box further in favour of companies who develop their own IP.
Companies who have developed their own IP are likely to have a nexus fraction close to 1 and so will not be greatly affected by the changes. Companies that have acquired their IP, however, will have a nexus fraction of less than 1 and so the proportion of their IP profit which may benefit from the Patent Box scheme will be reduced.
It is likely that the burden of keeping accurate records will increase for companies wishing to take part in the revised scheme because they will need to accurately track IP expenditure to the patent or product level.
How can A.A. Thornton & Co. help?
If you have any queries regarding this latest update or any other patent related queries, please do not hesitate to contact us. Our UK, European and German Chartered patent attorneys are qualified to advise on all aspects of UK, European and German patent law, and provide the following services (click on the links below for more details):
The basics cookie, when enabled, means that we can save your preferences for the cookie settings panel and you won’t see the banner pop-up again unless you clear your browser’s cookie cache.
If you disable this cookie, we will not be able to save your preferences. This means that every time you visit this website you will need to interact with this panel again to enable or disable the cookies.
If you disable this cookie, we will not be able to save your preferences. This means that every time you visit this website you will need to enable or disable cookies again.
This website uses DoubleClick and Quancast to collect anonymous information such as the number of visitors to the site, and the most popular pages.
Keeping this cookie enabled helps us to improve our website.
Please enable Strictly Necessary Cookies first so that we can save your preferences!