The Patent Box scheme, which offers 10% tax rate for companies who can prove they innovate, is soon to be closed.
This scheme was announced in 2011 and was effective in April 2013. It allows for the reduction of corporation tax by allowing a deduction from trading profits which are generated through the use of patents and rights to use them. This deduction is staggered so that it takes five years to achieve the full advantage of a 10% rate.
There has been some objection in the EU, predominantly from Germany, who is concerned that this change will encourage companies based abroad to bring operations to the UK in order to benefit from the 10% tax rate.
By encouraging such actions, the UK government appears to go against its campaign to prevent companies from manipulating their international structure to move taxable profits to countries with lower rates of taxation.
The deadline for the patent box tax is approaching. New applications cannot be made after June 2016, but if your company already uses the patent box it can continue to do so until June 2021. The reduced corporation tax rate will not be applicable after June 2021.
If you have any queries or would like further information about how you or your business might be affected, do not hesitate to contact us on 01923 224411 or email rebecca.potton@myersclark.co.uk.