Client Alert

UK Patent Box Update

November 24, 2015

By Arun K. Birla, Matthew Poxon & Paul Oumade-Singh

The 31 December 2015 deadline to bring Intellectual Property into the UK is fast approaching. Act quickly to ensure your patents benefit from the Patent Box grandfathering provisions.

Following the OECD project on Base Erosion and Profit Shifting (“BEPS”), the UK Government is seeking to amend the current Patent Box regime to comply with the OECD recommendations. As a result, a new OECD compliant regime will come into force on 1 July 2016. This is subject to a period of grandfathering which will allow companies to continue using the current regime until 30 June 2021.

There are certain anti-avoidance rules and companies wishing to transfer any patents into the UK from a related party, either through acquisition or licensing, must do so before 31 December 2015 in order to benefit from the current regime until 2021. It is therefore critical that companies assess their current global patent portfolio and act quickly to transfer any valuable patents to the UK.

Note that the 31 December deadline is only relevant to patents that are being transferred into the UK from related parties. The current regime is still open to new entrants (i.e. those developing new Intellectual Property or not currently opted into the regime) until 30 June 2016. These new entrants will also benefit from the grandfathering provisions.

The new regime uses a “nexus fraction” to calculate the amount of profits that can benefit from the regime. Broadly, this requires a company to establish a nexus between the R&D expenditure carried out in the UK (or outsourced to unrelated parties) and the profits arising from that expenditure. The effect is that qualifying expenditure which can form part of this calculation has been significantly narrowed in comparison to the current regime. For further information on the current regime please see the client alert of 8 April 2013, “The Patent Box – Unlocking the Potential in UK R&D”.

It should also be noted that even if a company is able to benefit from the grandfathering provisions, adequate records of expenditure in respect of intellectual property should be maintained in order to accurately track expenditure in the period between the introduction of the new regime and the end of the grandfathering period as this data will be needed to calculate the nexus fraction once the grandfathering period ends.

The consultation paper on the design of the new regime is open until 4 December 2015 with initial draft legislation expected by the end of December.


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Practice Areas

Patent Litigation


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Matthew Poxon

Partner, Corporate Department

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