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UK Patent Box

UK Patent Box. Update and Summary. What is it?. A 10% UK corporation tax rate on taxable income attributable to eligible patents Applicable now and fully effective from 1 April 2017. Who is eligible?. Eligible companies should:

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UK Patent Box

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  1. UK Patent Box Update and Summary

  2. What is it? • A 10% UK corporation tax rate on taxable income attributable to eligible patents • Applicable now and fully effective from 1 April 2017

  3. Who is eligible? Eligible companies should: • Have and be forecast to have profits chargeable to UK corporation tax • Have or be able to have qualifying IP rights • Have or be able to structure qualifying income from qualifying IP rights • Be able to meet the active ownership management test

  4. What are the benefits? Key benefits of Patent Box to businesses are: • Reduced corporation tax levels • Can assist in securing funding • Attractive to investors • An improved return on original investment

  5. What IP qualifies? Qualifying (eligible) IP rights are: • New or existing rights • Owned or held under an exclusive license • Patents granted by; UK Intellectual Property Office, European Patent Office or certain countries in the European Economic Area: Austria, Bulgaria, Czech Republic, Denmark, Estonia, Finland, Germany, Hungary, Poland, Portugal, Romania, Slovakia and Sweden • Supplementary protection certificates for medicinal and plant protection products • Plant breeders and plant variety rights • Medicinal and veterinary products with marketing authorisations and marketing or data protection • Derived from active development (meaning: a significant contribution to the creation or development of the patented invention or a product incorporating the patented invention)

  6. What income qualifies? Qualifying income is WORLDWIDE: • Sales income from eligible patented items or non-patented items incorporating an eligible patented item or designed to incorporate a patented item • Licence fees and royalties received from exclusive licences granted under eligible patents • Income from sale of eligible patents

  7. Licensees For licensees to qualify their licence must: • Be granted by the person that holds the eligible patent or exclusive licence • Be exclusive for market or territory Special rules apply to intra-group licences

  8. Active ownership • Eligibility for Patent Box requires active involvement in the qualifying development of the IP rights Qualifying development is: • Creating or significantly contributing to the creation of, the patented invention; or • Performing a significant amount of activity to develop the patented invention, any product incorporating the patented invention, or any process incorporating the patented invention

  9. EU Review • In December 2013 a meeting of ECOFIN (the EU Finance Ministers) asked the EU Code of Conduct Group to assess and review all patent box regimes in the EU • This arose from a complaint that the UK regime was harmful competition due to: • insufficient link between UK economic activity and the Patent Box tax incentives; and • Qualifying income not being tied to a specific item of IP

  10. EU Challenge – Expected Outcome • No ECOFIN decisions will be made before the end of 2014 • “Safety in numbers”, as review of all patent incentives and not a specific review of the UK patent box • No suggestion of retrospective changes so the full benefits should apply until changes made • UK Government continues to defend Patent Box • Some minor modification expected but the regime should continue as: • Already successful • IP tax legislation in other EU states has been reviewed and accepted • UK requires to maintain its competitive edge

  11. Implementation • Businesses should continue to consider the UK Patent Box as a building block for a successful and tax efficient IP strategy • Implementing it NOW will get the full benefit of the existing regime until any changes arising from the EU review are implemented • Even if amended to reflect the regimes which already exist in other EU members, Patent Box should still provide significant benefits

  12. McClure Naismith Team Contacts for more information: - Robin Shannan (London) rshannan@mcclurenaismith.com Scott Kerr (Edinburgh) skerr@mcclurenaismith.com who can introduce you to a multi-discipline team of experts that brings together with an average of more than 30 years’ experience at maximising the value of IP Patent Attorneys Lawyers Tax Advisors Accountants Valuers

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