On December 9, 2015 the UK HM Revenue & Customs (HMRC) published a policy paper titled: “Corporation Tax: Patent Box - compliance with new international rules”.

The policy paper gives the following general description of the measure:

“The government is proposing changes to the design of the UK Patent Box to comply with a new international framework for preferential tax regimes for intellectual property (IP) set out by the Organisation for Economic Co-operation and Development (OECD).

This will mean that the amount of profit from an IP asset which can qualify for the reduced 10% rate of Corporation Tax (CT) available through the UK Patent Box will depend on the proportion of the asset’s development expenditure incurred by the company.”

With respect to the operative date the policy paper notes the following: 

“The measure will have effect for new entrants to the Patent Box on or after 1 July 2016, and also for some IP assets (e.g. patents) acquired on or after 2 January 2016.

A new entrant is either an IP asset created on or after 1 July 2016, or a company making an election into the Patent Box that relates to that, or a later, date.

For this purpose, an IP asset will be deemed to come into existence when the relevant application (such as for a patent) is made. So if a patent application has already been lodged at 1 July 2016 but not yet granted, this will not constitute ‘new’ IP.

IP not covered by the new Patent Box rules will continue to receive the benefit of the existing Patent Box for a period of 5 years, which is until 30 June 2021, except that someIP acquired on or after 2 January 2016 may only receive the benefit of the existing Patent Box until 31 December 2016.”

Click here to be forwarded to the webpage on GOV.UK where one can find links to the policy paper as well as to the Draft legislation and Draft explanatory notes.

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