Possible changes to UK Patent Box


A joint statement released by the UK and German governments suggests that changes to the UK’s Patent Box rules may be introduced in 2016.

The statement suggests that intellectual property (“IP”) related tax incentives should be more directly connected to Research and Development (“R&D”) activities. The UK’s agreement to the proposals is likely to result in the following changes to the UK Patent Box rules:
  • From 2016, the availability of relief is likely to be restricted to situations where patents have been developed through UK-based R&D activity;
  • The existing regime applying to licensed patents will be closed to new entrants in 2016 and abolished entirely in 2021. Between 2016 and 2021, IP previously elected into the Patent Box regime will continue to attract relief.
  • Patents developed through UK based R&D will continue to qualify for the 10% tax rate.

Whilst in isolation, this reduces the attractiveness of the Patent Box, it should be borne in mind that the proposals are intended to apply to all G20 and Organisation for Economic Co-operation and Development (“OECD”) countries. A widespread implementation of the rules may have a much greater impact on the international competitiveness of other European countries where a Patent Box forms a much more fundamental element of the tax system.