MH Commercial and Media

Tuesday 9th June, 2015

Planned closure of the UK Patent Box to new entrants

The UK Patent Box enables companies to apply (subject to certain phasing-in rules) an effective 10% corporation tax rate to profits earned from its patented inventions. After initial announcements of a proposed tax break for intellectual property in 2009, the Patent Box finally came into effect on 1 April 2013. However, following a campaign led by Germany arguing that the UK scheme is unfairly competitive, the regime (which is still in its infancy) is already set on course to be transformed.

The Patent Box, in its current form, will be closed to companies that have not elected into it by June 2016, and will be closed altogether by June 2021. Companies could, therefore, still benefit from the tax break under the existing rules for a few more years, but must act swiftly if they have not yet elected into the scheme. Although a replacement scheme will likely be introduced, any new scheme will almost certainly have a narrower application.