Following negotiations between the UK and Germany the UK Patent Box tax relief regime may be facing some changes.
A joint statement issued by Germany and the UK on 11 November contains proposals that will be considered by the G20 and OECD member countries in the Forum on Harmful Tax Practices (FHTP) at it’s meeting 17-19 November 2014. Under such proposals, tax benefits must be connected directly to R&D expenditures within the territory in which the benefit is claimed. This will mean that the Patent Box scheme may need to be amended so that it’s benefits are only available in relation to patents for inventions which stem from research and innovation carried out in the UK.
If the proposals are accepted, transitional provisions keep the UK Patent Box scheme as it presently stands until June 2021 for persons already claiming the benefit. However, no new applications under the present scheme will be accepted after June 2016. By then it is expected that a revised scheme will have been implemented having amended provisions under which new applications must qualify. Under any new scheme, it seems likely that the present patent ownership provision will be removed and replaced by provisions linking the income qualifying for the UK Patent Box regime to the original R&D spend in creating the patent (which must have taken place in the UK).
The changes are unlikely to adversely affect many Northern Ireland companies. However, the changes may be more detrimental to corporates who hold the IP but have a fellow overseas group company carry out all or some of the R&D activities (and possibly also Northern Ireland based IP holders who carry out substantial R&D in the Republic of Ireland). For such companies, it may be necessary to consider taking action to accelerate the prosecution of any new or pending patent applications with a view to obtaining grant of a patent before the June 2016 cut off for claiming benefit under the current scheme.