Withdrawal of EU Investigation of the Patent Box: Good News for UK Innovators

It has been reported that the European Commission’s (EC) decision to withdraw its investigation into the UK Government's Patent Box scheme is positive news for British innovators and provides greater clarity around the future of the scheme. 

The scheme, which allows profits from inventions protected by a UK or other qualifying patent to benefit from lower corporation tax, has been helping to encourage innovation in the UK. It has seen notable criticism, including complaints by the German Finance Minister and warnings by the EC that the UK’s Patent Box legislation created unfair levels of competition, which led to the subsequent enquiries. However, Patent Box has now received broad support following a joint proposal from the UK and German governments. 

This is positive news for UK innovators and removes the spectre of the European Commission's intervention in Patent Box, ensuring that entrepreneurial businesses can continue to benefit from this important tax incentive for years to come.

There is no doubt that the financial relief this type of scheme provides fuels innovation and allows businesses to compete more readily, especially in the technology and pharmaceutical sectors where this has been adopted more widely.

However, there are still key areas of uncertainty that need clarifying to ensure businesses can properly plan for the future.

This news offers businesses further certainty, but more is needed. Businesses are still awaiting news on proposed amended legislation, which is expected later this year. For example, it’s been announced that the current scheme will close to new entrants by June 2016 and that it will be closed completely by 2021. However, further specifics are yet to be revealed about what is being dubbed 'Patent Box II'.

The timescales that have been announced are very tight and could make it difficult for businesses to continue to benefit from Patent Box if they don’t have the time needed to plan ahead. The Government must address this quickly as this uncertainty for businesses can be very unsettling and prevents innovative UK companies from planning their future.

Michael Jaeger is patent attorney at intellectual property firm Withers & Rogers (UK).