Last month, Treasury Minister David Gauke gave a robust defence of the UK's Patent Box scheme, which allows profits from technologies protected by a UK or other qualifying patents to benefit from a lower rate of corporation tax.  Although Mr Gauke argued forcefully against the so-called "nexus approach" (which some countries insist should be used when considering Patent Box benefits) George Osborne yesterday acquiesced to those promoting the nexus approach, so that the tax relief provided by the UK’s Patent Box scheme will soon only be enjoyed by those that conduct R&D in this country.

This follows complaints by the German Finance Minister that currently, the scheme gives an unfair advantage when it comes to attracting inward investment from overseas companies. Osborne has therefore bowed to pressure and vowed to amend the legislation.

Clearly, there are still key areas of uncertainty that need clarifying to ensure businesses can properly plan.

Michael Jaeger, patent attorney at Withers & Rogers, said:

“Key questions need addressing as a matter of urgency. For example, it’s been announced that the current Patent Box scheme will close to new entrants by June 2016 and that it will be closed completely by 2021. However, further specifics of the updated scheme are yet to be confirmed.”

The timescales that have been announced are certainly tight and put at risk the need to realistically facilitate a smooth transfer to the new regime in terms of handover and administration.

Michael concluded:

“This could throw business forecasts into flux as the arrangement to transfer to an updated scheme might cut off those UK companies that no longer qualify, with little notice. The joint UK-German statement is directed to other G20 countries, but its ramifications have not yet been made clear to businesses here in the UK.  The Government, therefore, must address this as well as other concerns as soon as possible, in order to clarify its intentions for any modified Patent Box scheme that is proposed.  Such uncertainty for businesses can be very unsettling and prevents innovative UK companies from planning their future.”