The UK Patent Box regime aims to incentivise companies to retain and commercialise existing patents and to develop new innovative patented products. The regime allows companies to apply a lower rate of corporation tax to qualifying worldwide profits attributable to qualifying patents and other similar intellectual property (“IP”) rights. It forms part of the UK Government’s growth agenda to encourage companies to locate the high-value jobs associated with the development, manufacture and exploitation of patents in the UK and maintain the UK’s position as a world leader in patented technologies. The regime came into force on 1 April 2013 and will be phased in until April 2017.
The headline rate for qualifying profits will be 10% (phased in by April 2017). However, the effective tax rate is likely to be higher as certain expenses are disallowed and certain profits are excluded from the regime. Therefore, the UK Patent Box regime does not provide tax rates as low as can be achieved elsewhere in Europe (e.g., Luxembourg, Switzerland, Ireland, the Netherlands and Belgium). Companies that do not want to incur the cost and complexity of establishing separate IP holding companies are likely to welcome the new regime as are companies with existing IP structures that are concerned about recent ministerial statements about tackling tax base erosion.
Continue Reading The UK Patent Box Regime: An Overview