The UK is to introduce a new patent box regime following the OECD’s recommendations on countering ‘harmful’ tax practices. The new regime applies a ‘modified nexus approach’, meaning that profits arising from qualifying IP are only available for a preferential tax rate to the extent that the claimant company itself incurs the relevant R&D expenditure that led to the creation of the underlying IP. Many domestic and multinational groups will face a significant compliance burden in calculating the nexus fraction and a number will need to restructure in order to access the new regime. Although the new regime does not come into force until 1 July 2016, many businesses will be well advised to act now.
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