The government will legislate in Finance Bill 2017 to add specific provisions to the Patent Box rules covering cases where research and development (R&D) is undertaken collaboratively by two or more companies under a ‘cost sharing arrangement’
The proposals are designed to 'ensure that such companies are neither penalised nor able to gain an advantage under these rules by organising their R&D in this way,' according to the Treasury.
The Patent Box enables companies to apply a lower rate of corporation tax to profits earned after 1 April 2013 from patented inventions.
The changes will have effect for accounting periods commencing on or after 1 April 2017.
In 2013/14, the Exchequer paid out £342.9m to companies claiming tax relief under Patent Box rules, with the largest companies receiving the bulk of the reliefs at £327.2m.
Although the tax break is seen as mainly benefitting larger businesses, small and micro businesses account for 41% of claimants of Patent Box reliefs, although their share of actual monetary tax relief is negligible at £3.9m, equivalent to only 1.2% of the overall total.
More details on the proposed changes will be available on 5 December when the government releases the draft Finance Bill documentation. There are no cost impact figures available as yet.