Proposed New Rules May Limit Scope and Duration of UK Patent Box Regime
12 November 2014
The UK Government has issued a joint statement with the German Government to the effect that the OECD Forum on Harmful Tax Practices (FHTP) has developed proposals for new rules which may limit the scope, and possibly the duration, of the UK Patent Box regime. The proposed approach "seeks to ensure that preferential regimes for intellectual property require substantial economic activities to be undertaken in the jurisdiction in which a preferential regime exists, by requiring tax benefits to be connected directly to R&D expenditures". The UK and Germany have proposed that IP regimes which do not comply with this requirement be closed to new entrants (products and patents) in June 2016 and that such schemes be abolished by June 2021. It is proposed that IP within existing regimes should be able to retain the benefits of those regimes until June 2021.
It is unclear at this stage whether the proposed new rules will be enacted. In the event that the proposed new rules do come into force, we anticipate that the UK will retain a modified Patent Box regime after June 2021 providing preferential tax treatment of profits related to R&D activities undertaken in the UK only.
For more information, please see the Government news item.