The legislation governing the use of the Patent Box regime can be found in Part 8A of the Corporation Tax Act 2010. Within this part, s 357GC covers situations where a cost sharing arrangement is in place and one party to the arrangement holds the qualifying IP right. Section 357GC permits another party to the arrangement who does not own the qualifying IP right to be treated as if they did own the right, allowing them to claim the benefit of the Patent Box regime where they incur qualifying expenditure.
There is concern that the legislation in its current format does not adequately address how the correct Patent Box relief is calculated where a cost sharing arrangement is in place.
The Government has announced that specific provisions will be added to the Patent Box rules in Finance Bill 2017. These will focus on situations where research and development have been undertaken under cost sharing arrangements involving two or more companies, one of which owns a qualifying IP right.
The provisions are intended to provide clarity to companies using the Patent Box in relation to the correct amount of expenditure that they can claim for research and development. The new provisions will have effect for accounting periods that commence on or after 1 April 2017.