Last month it was reported that the EU Commission is to investigate whether the UK patent box scheme is in breach of the EU Code of Conduct on Business Taxation, see e.g.:

A European Challenge to the UK Patent Box

The latest development is that the Council meeting in Brussels on 10 December discussed business taxation and has invited the Code of Conduct Group to assess or consider all patent boxes in the EU, including those already assessed or considered before, by the end of 2014. The aim is to "ensure consistency with the principle of equal treatment, also against the background of international developments, including those in relation to the OECD Base Erosion and Profit Shifting (BEPS) initiative". The Group is to report back on its work to the Council by the end of the Greek Presidency i.e. by the end of June 2014.

While we wait to hear the outcome of the Code of Conduct Group's assessment, it is unclear whether the UK patent box is really under threat from EU intervention. A patent box scheme has already been in force in the Netherlands since 2007. Other tax schemes that may be scrutinised include the 'IP licence box' available in the Swiss canton of Nidwalden since 1 January 2011.  Innovative companies have been attracted to the shores of Lake Lucerne by rules that provide net licensing income resulting from IP is taxed separately at a flat rate of only 1.2%.

UK companies that wish to take advantage of the patent box can make an election in their corporation tax return for the 2013 financial year. HMRC will require a declaration of the company's relevant IP profits, which is likely to require advice from your tax adviser and patent attorney. Dehns can provide patent box audit services to assist companies in making a declaration and claiming the reduced 10% rate of corporation tax.

Footnote

The report of the 10 December meeting is available here:

www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ecofin/140041.pdf

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