The Existing Scheme Runs Only Until the End of June 2016

In April 2013 the UK Government introduced the “Patent Box” tax relief so that corporation tax on profits relating to some patented products could be reduced.  The full effect is still being phased in, but under the current scheme from FY 2017 the relevant effective corporation tax rate will be 10% rather than the currently scheduled 19%.

However, there have been some political objections within Europe to the scheme, with other countries feeling that some aspects of the scheme could be used for unfair tax avoidance.

As a result, the existing scheme is going to be replaced with a new scheme with effect from 1 July 2016.

The new scheme will have more restrictions as compared with the existing scheme. One of the most important changes will be a greater emphasis on tying the relief to R&D that has been carried out in the UK, and a requirement for claimants to have substantial economic activities in the UK.  There will also be revised rules regarding how R&D expenditure is accounted for, with a requirement to “track and trace” R&D expenditure with respect to individual patents or products.

The first of these changes will not affect companies who are solely based in the UK and who carry out of their R&D there.  However, the increased administrative burden of the second of these changes could be significant, for small and large companies alike.

For those who have opted in to the existing scheme before 30 June 2016, the existing scheme will run until 30 June 2021.  Therefore in some cases it may be prudent to take action now to make sure you take advantage of the existing scheme.

The existing regime will apply for patents which are pending upon opt-in to the scheme.  Therefore,we recommend that if you wish to opt in to the Patent Box, you file any new patent applications or that you buy in or take an exclusive licence from a third party of a relevant patent before the end of June 2016

In any case, now is the time to act to assess your IP position and maximise the benefit of tax relief that you may be entitled to.  Please get in touch with us via to discuss your position, or fill out our contact form here.