“Urgent clarification” of Patent Box changes needed

German finance minister Wolfgang Schauble  believes that “preferential tax treatment of intellectual property must be dependent on substantial economic activity. More and more countries are speaking out against allowing too much leeway for large multinationals to minimise their taxes. Just because something is legal, does not mean it is fair in tax terms.

Does this mean we could be losing one of our most competitive advantages when it comes to foreign investment  

Despite Treasury Minister David Gauke defending the 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, Osborne has bowed to pressure and vowed to amend the legislation.

However, although there are clearly still key areas of uncertainty that need clarifying to ensure businesses can properly plan.

Michael Jaeger, patent attorney at Withers & Rogers, said: Key questions need addressing as a matter of urgency. For example, it’s been announced that the current Patent Box scheme will close to new entrants by June 2016 and that it will be closed completely by 2021. However, further specifics of the updated scheme are yet to be confirmed.

The timescales that have been announced are certainly tight and put at risk the need to realistically facilitate a smooth transfer to the new regime in terms of handover and administration.

This could throw business forecasts into flux as the arrangement to transfer to an updated scheme might cut off those UK companies that no longer qualify, with little notice,” he said.

The joint UK-German statement is directed to other G20 countries, but its ramifications have not yet been made clear to businesses here in the UK.  The government, therefore, must address this as well as other concerns as soon as possible, in order to clarify its intentions for any modified Patent Box scheme that is proposed. Such uncertainty for businesses can be very unsettling and prevents innovative UK companies from planning their future.

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