Patent Box – Consultation Published

This a new 10% corporation tax rate on net income generated from patents, to apply from 1 April 2013. We summarise below the key points to the consultation:

  • Companies can elect for it to apply (in case admin burden outweighs benefits) (if opt out cannot opt in for a period of 5 years)
  • company must hold the patent and receive income
  • the calculations on what represents the net patent income are complex
  • a decision is to be made as to whether it applies to patents first commercialised after a certain date or to all patents, with the benefits being phased in over 5 years
  • consultation period runs to 2 September, draft legislation due in the Autumn
  • applies to patents granted by UK Intellectual Property Office, European Patent Office on worldwide income generated from such patents (consultation will consider patents obtained from other EU member states)
  • Also applies to Supplementary Protection Certificate, Regulatory Data Protection and Plant Variety Rights but no other intellectual property
  • includes patents held under a joint venture or under a cost sharing arrangement, and acquired patents
  • the company (or group member) must be involved in the exploitation of that patent, actively involved in the invention or the application
  • the 10% rate will apply to all profits from date of application of the patent but the calculation is only made once patent granted, can look back up to 4 years from grant and calculate impact all in the year of grant
  • patent box losses can be group relived against patent box profits or carried forward against future patent box profits
  • it isn't actually a new tax rate of 10%, it is a deduction from taxable profits and the profits are then taxed at normal UK corporation tax rates
  • a non-statutory pre clearance system will be available
  • for accounting periods straddling 1 April 2013 it will be pro-rata

If you hold patents or intend to register a patent please contact Nigel Holmes

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