The UK Patent Box regime came into force on 1 April 2013 and by 2017 will allow an effective reduction of corporation tax to 10% for income from qualifying patented inventions.
Following interventions by the German Government and the European Commission the UK Government has recently proposed changes to the current Patent Box arrangements.
In particular the UK Treasury issued a statement at the end of 2014 confirming that the current UK Patent Box scheme will close to new entrants by 30 June 2016. It will be replaced by a new Patent Box regime, the specific details of which are yet to be confirmed. Transitional arrangements will allow the benefits of the current regime to remain available until June 2021 for existing participants, and for companies entering before the closing date.
However, the statement makes assurances that the Government will protect the interests of the UK as an excellent location for technology-based businesses by retaining a competitive Patent Box regime.
The proposed new Patent Box regime we understand will aim to align taxation benefits more closely to R&D activity carried out in the UK. Therefore, UK-based companies that carry out R&D in the UK should continue to benefit. On the other hand, foreign companies proposing to set up operations in the UK based on R&D carried out abroad may find the replacement arrangement to be less attractive than the current one.