We have been working with Penelope Warne and our large energy
team and are aware that many energy companies are looking at the
new Patent Box regime as there are significant tax advantages which
may be gained.
What is it?
A beneficial tax regime to encourage development and
exploitation of patents in the UK. Profits will be taxed at 10%
instead of the main corporation tax rate of 22%.
Why?
Make the UK more competitive as against other countries in
Europe such as Luxembourg, Switzerland.
Who can take advantage?
Any corporate deriving value from UK or European patents, provided
they originate or develop the technology.
What kind of profits qualify?
Pure or embedded patent income, including profits from the
sale of products deriving their value from patents, but not profits
from the sale of products made by a patented process which are not
themselves protected by a patent or profits from services based on
patented innovation. These rules might mean that intra group
structures or streaming needs to be put in place. One element of
the draft legislation of particular relevance to the energy sector
is that income arising from oil extraction activities or oil rights
will be excluded from the regime.
Why are CMS well placed to advise?
The alternative structures and calculation of relevant
profits may be complex and we are well placed to advise.
Our multi-disciplinary team have been tracking the development of
the proposals. We can bring detailed industry knowledge through our
sector focus on energy companies as well as the necessary patent
law and tax structuring skills. As transfer pricing methodologies
between group companies can drive the calculation of Patent Box
profits our expertise here will also be highly relevant. Transfer
pricing policies need to be supported by legal documentation on
which our commercial lawyers can act.
As the CMS network covers most other European jurisdictions, we can
also advise on the likely competitive regimes (see our Patent Box
Zone for our comparative table).
Timing
Regime expected to have effect by April 2013. Full benefit
will be phased in by 2017. This is a long term plan as the tax
benefits will grow as patent profits accrue over time.
What can we do now?
We can offer a "patent review": to identify Patent Box
and other opportunities. If you would be interested in a patent
review or would like to discuss any of the issues raised in this
article, please use the contact details below, or alternatively
speak to your usual CMS contact.
This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq
Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.
The original publication date for this article was 13/04/2012.