Now is the time

    The patent box tax relief scheme has only been around for four years, but already some substantial changes have been made to the scheme that makes calculating this relief a lot more complicated. Some of the changes that have been made since 1 July 2016 include a mandatory requirement for streaming, the need to substream individual patents and patent families, direct matching of R&D to patent income streams and the restriction of relief where the R&D has been subcontracted to a related party or externally acquired.

    Whilst these new rules may not affect patent box claim values for all companies, there are certainly implications for recording patent and R&D data accurately which need to be adhered to from July 2016, meaning that the longer you leave it, the further back you need to go to make sure that R&D expenditure has been correctly matched to corresponding income.

    Fortunately, it is still possible to elect in to the old scheme, which postpones the new scheme requirements until 2020 at the earliest. As long as companies elect in to an accounting period ending on or before 30th June 2016 then grandfathering provisions apply allowing the company to defer new scheme requirements to the 2020-21 tax year. As there is a two year limit to make an election companies have until 30th June 2018 to take advantage of this provision. 

    However, consider a company with a July year end. The company would need to elect in to the year ended 31st July 2015 to be able to defer the new scheme provisions, which means that the election had to be made by this coming July. Therefore companies need to think about acting sooner rather than later to avoid unnecessary administration before it is required. 

    It should be noted that companies that have registered IP after 1st July 2016 will still have to use the new scheme provisions; however as long as the IP was filed before this date any pending patents will still be able to qualify under the old scheme.

    For further information please contact Abbey Tax on 0345 223 2727 and ask for Mark Wood.