Patent Box progress report
December 2011
Following our earlier article on the Government’s June 2011 Consultation on the Patent Box, the Government has now published its response to the consultation and the draft legislation. The draft legislation will now be consulted on with the aim of including the final legislation in the Finance Bill 2012. The Patent Box is on target to take effect from 1 April 2013.
By way of a reminder, the Patent Box is a Government initiative intended to promote innovation. The Patent Box will result in a 10% corporation tax rate on that part of a company’s income that derives from qualifying patents. This reduction in corporation tax is to be phased in from 1 April 2013. The Patent Box regime will apply to existing patents and patent applications and the reduction in corporation tax may be back-dated to include a period of up to six years prior to grant of a patent. We therefore recommend that companies review their IP portfolios and their patenting strategies now to ensure that relevant patents within their existing portfolios are identified and that plans are in place to patent key product technologies in future in order to benefit fully from the Patent Box.
As a result of representations made by Haseltine Lake and others during the recent consultation the Government proposes making the following key changes to the previously published details of the Patent Box regime:
• Extending the regime to include patents issued by other EU national patent authorities which have comparable patentability criteria and search and examination practices to the UK or European patent office.
• Amending rules on exclusive licensing so that groups can qualify where IP is held centrally but actively owned and managed in the UK. This will avoid the need for innovative groups to restructure in order to qualify for the Patent Box.
• Modifying the proposed development criteria, which will ease compliance for innovative companies and more specifically target groups which are not involved in creating or developing IP.
• Reforming the “active ownership” rules to more specifically target artificial profit shifting. This will ensure that companies involved in early stage development are not excluded from the Patent Box.
• Reducing the mark-up rate used to calculate routine profit, and excluding R&D costs from the costs marked up. This will mean that significantly more profit is eligible for the reduced Patent Box rate, making the regime more competitive.
• A new approach to excluding profit attributable to valuable brands, to achieve a more consistent and fair allocation of profit to the Patent Box.
• Improving the level and rate of the small claims safe harbour for allocating residual profit between patents and brands.
• Simplifying the divisionalisation rules which allow companies to allocate profit more accurately to qualifying income, to make them more accessible.
In addition, further information on the Patent Box can be found on the Patent Box consultation site via the article link.
Our more detailed briefing note can be downloaded below.
 article link
 download
|
