October 3, Treasury minister David Gauke
told the Securities Industries Conference that he rejected
any suggestion that the UK’s Patent Box
facilitates profit shifting.
be clear here: categorically, it does not create an opportunity
for businesses to reduce their taxes without increasing their
value to the UK economy."
on to defend the use of a transfer pricing approach to the
Patent Box, arguing that the so-called nexus approach
– favoured by many of those EU governments that have
been critical of the UK’s Patent Box scheme
– could "infringe the freedom of establishment" and be
The nexus approach would also
require "incredibly detailed tracing of expenditure and
income", he said, placing a heavy burden on businesses and tax
It may not come as much surprise, therefore, to find that
Osborne yesterday revealed in a joint statement with his German
counterpart, finance minister Wolfgang Schauble, that they are
proposing new rules based on a "nexus" approach.
read more about the statement and reaction to it in an
article by our sister magazine International Tax Review).
what do the changes mean? I spoke to one patent attorney this
morning who concluded that the wording of the statement
– confusing and avoiding the term "patent box"
completely – suggested that the UK Treasury had
been caught off-guard. The Patent Box – at least as it
is now formulated – is likely to be a casualty of
wider EU machinations and behind-the-scenes negotiations
between the UK and Germany over reform of the EU Treaty.
inconclusive statement raises as many questions as it answers:
it talks about closing the scheme to new entrants in 2016, and
abolishing schemes by 2021, yet it doesn’t make
clear whether the existing scheme will be changed to a nexus,
rather than transfer pricing, approach within that
try to get more information in the coming days about how the
reforms – which will require legislative changes
– will affect IP owners and their advisers. If you
have insights into how they will work in practice do let us