Partner Article

UK’s flagship patent box under attack by Brussels

The UK patent box took practical effect from 1st April 2013. It’s a new, preferential tax regime under which companies pay corporation tax at only 10% (the mainstream rate is currently 23%) on profits attributable to patents and certain other intellectual property.

When it introduced the patent box, UK government intended to promote the UK as the place to be for innovative businesses.

A number of other EU member states have their own version of the patent box, with effective tax rates of around 5%-7%.

The UK patent box has recently been criticised by Germany which sees a number of its companies moving to take advantage of the UK’s 10% tax rate on patent income.

Brussels has now responded to German complaints and has ruled that the UK patent box amounts to harmful tax competition. The UK Treasury will be defending the patent box in Brussels next week. However, with harmful tax competition being seen as an impediment to the OECD’s crackdown on global tax avoidance, we can expect Treasury officials to come in for a rough ride.

It is also possible that Belgium, France, the Netherlands and Spain (all of which have equivalent tax regimes for intellectual property) will have their arrangements reviewed again by the EU Code of Conduct Group. Brussels is showing every sign of playing hardball, threatening a referral to the Ecofin Council if countries do not accept its rulings.

This was posted in Bdaily's Members' News section by George Bull .