TT227: Patent Box Regime – rules changing 30 June 2016 so act now!

Patent Box Regime

Many of you will now be aware of the Patent Box Regime (“PBR”), which has been with us for over two years.

The PBR allows companies which own patents, or certain other medicinal or botanic innovation rights, to elect for the profits relating to those patents or rights to arise within a ‘Patent Box’. A proportion of the profits will then effectively suffer a reduced rate of corporation tax of just 10%!

When you consider that the profits which can be included in the PBR are not only those from the sale of patented products, but also products incorporating a patented item, spare parts, licence fees, proceeds of sale or other disposal, infringement income and notional royalties for process patents and plant variety rights, you begin to get an understanding of just how generous this relief actually is. So generous, in fact, that the EU raised concerns that it could confer unfair tax advantages on UK companies and has applied sufficient pressure on The Treasury to cause them to withdraw it. Therefore, the Patent Box regime, in its current guise, will be closed to new entrants by 30 June 2016 and abolished completely by 30 June 2021.

In order to elect into the PBR you need only give notice to HM Revenue and Customs in writing. In fact an entry on your company’s tax return will suffice. However, you must make a claim within two years after the end of the accounting period in which the relevant profits and income arose. Therefore, it would be prudent for companies which have qualifying income arising in 2013 to write to HM Revenue & Customs electing into the regime, as waiting for your tax returns to be submitted is likely to cause you to miss out on a portion of this very generous relief.

You can choose to elect into the regime whilst you still have patents pending. This will effectively allow you to go back more than two years once your patent is granted, should it take longer than this for it to be processed.

Therefore if you own Patents you should really act now. If you require any further information on the PBR or would like help making a claim, please do not hesitate to contact you Barnes Roffe Partner.

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