UK Patent Box changes require urgent clarification, says Withers & Rogers

Last month, Treasury Minister David Gauke gave a robust defence of the UK's Patent Box scheme, which allows profits from technologies protected by a UK or other qualifying patents to benefit from a lower rate of corporation tax.

Although Mr Gauke argued forcefully against the so-called "nexus approach" (which some countries insist should be used when considering Patent Box benefits), UK Chancellor of the Exchequer, George Osborne, yesterday acquiesced to those promoting the nexus approach, so that the tax relief provided by the UK’s Patent Box scheme will soon only be enjoyed by those that conduct R&D in this country.

The Chancellor earlier this month outlined that Germany and the UK have agreed a joint proposal to advance the negotiations on new rules for preferential intellectual property (IP) regimes within the G20/OECD BEPS (Base erosion and profit shifting) Project, relating to tax breaks for intellectual property. (The Pharma Letter November 13).

This follows complaints by the German Finance Minister Wolfgang Schauble that, currently, the scheme gives an unfair advantage when it comes to attracting inward investment from overseas companies. Mr Osborne has therefore bowed to pressure and vowed to amend the legislation.

Key areas of uncertainty