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Technical updates - Published 26th January 2016

R&D Patent Box – Thinking outside the box

The future of the Patent Box regime

For the brief period of its existence, the UK’s Patent Box regime has been a significant opportunity for innovative companies to reduce their tax exposure. The 2014 Autumn Statement made it clear however that things are set to change.

UK Patent Box – the current regime
Currently companies can opt to pay a reduced corporation tax rate of 10% on worldwide attributed profits from patented products registered in the UK or EU, instead of the standard 20% rate. It was announced at the end of 2014 that this scheme is to be wound up and replaced with a new, EU compatible regime.

Why the need for change?
At the end of 2013 the European Commission concluded that the UK Patent Box breached two of criteria set out in the EU Code of Conduct for “harmful tax practices”.

The UK, in a joint statement with Germany, have since announced they have agreed to align the UK patent regimes with the EU “modified nexus” approach, which insists on a direct link between R&D and the income derived therefrom.
Read more about the future of the Patent Box regime.

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