The patent box is up and running − but for how long?

The UK and Germany have issued a joint statement on their proposal for a modified approach to preferential IP regimes which will include the UK’s patent box regime. 

The statement has been put out as a reaction to the OECD action point 5, Countering Harmful Tax Practices More Effectively, Taking into Account Transparency and Substance. 

The modified approach will look at ensuring that substantial economic activities must be undertaken in the jurisdiction in which a preferential regime exists, by requiring tax benefits to be connected directly to R&D expenditures.  This is not unreasonable and should put an end to some of the perceived abuse of the patent box.

The intention is that to manage the transition to the new regime: 

  • all existing regimes will be closed to new entrants in June 2016;
  • existing regimes will be abolished by June 2021;
  • those within the existing regimes retain their regime benefits until June 2021;
  • the Forum on Harmful Tax Practices will reach agreement by June 2015 on a practical and proportionate approach that can be implemented by companies and tax authorities, including transitional mechanisms for moving intellectual property from existing regimes into new ones.

At the moment we don't know how the now regime will differ from the UK patent box regime but it will almost certainly not be as generous.  It is now a case of watch this space. 

To view the full joint statement, please follow this link

Brian is the Director of Tax at Michelmores. For more information please contact Brian via email at or by telephone, on 01392 687662.