The measure
The government has been working to incorporate the changes required as a result of the OECD's work on BEPS Action 5: Harmful Tax Practices, which requires implementation of a Nexus approach to the Patent Box regime. The bulk of the changes were substantively enacted on 15 September 2016 as part of Finance Bill 2016 and came into effect as at 1 July 2016, when the current Patent Box regime closed to new entrants. Grandfathering provisions are available until 30 June 2021.
The government have brought out draft provisions as part of Finance Bill 2017 to cover how these changes will apply to companies within a 'cost sharing arrangement'. The intention of these provisions is to ensure that companies within a 'cost sharing arrangement' are neither advantaged nor disadvantaged under the Nexus regime.
Further to consultation the draft legislation has been amended, specifically to narrow the definition of a qualifying 'cost sharing arrangement', and to include provisions to better align a company's payments and receipts within a 'cost sharing arrangement'.
Who will be affected and when?
Companies within a 'cost sharing arrangement' who are expecting to make a claim under the new Nexus provisions for the UK Patent Box. Whilst all other changes to the Patent Box regime came into effect from 1 July 2016, the changes specifically covering 'cost sharing arrangements' will come into effect on 1 April 2017.
Our view
We welcome the commitment to ensuring that companies within 'cost sharing arrangements' are neither advantaged nor disadvantaged under the Nexus regime.
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