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HMRC internal manual

Corporate Intangibles Research and Development Manual

Patent Box: new regime: What is meant by the old and new regime? CTA10/ s357BO

The Patent Box legislation was first enacted in Finance Act 2012 and the scheme commenced on 1 April 2013. This is now being referred to as the ‘old’ regime or ‘old rules’ although it is important to note the continuity – the Patent Box has not been repealed and replaced, the substance of the original rules mostly remains.

As part of the OECD-G20 BEPS (base erosion and profit shifting) project changes were made to the UK Patent Box to link substantive R&D activity to any Patent Box deduction.

That legislation is contained in the Finance Act 2016, and the changes commenced from 1 July 2016. This is referred to as the ‘new’ regime or ‘new rules’.


Is my company in the ‘old’ or ‘new’ regime?

The new, OECD compliant rules always apply where a company is a ‘new entrant’ to the Patent Box and they then necessarily apply to all of its IP income.

Whether a company is a ‘new entrant’ depends on for which accounting period the s357A(1) election to enter the Patent Box was made. The 2 year time limit to elect into Patent Box has not changed.

  • If the s357A(1) election to enter the Patent Box was made for an accounting period ending after 30 June 2016 and not straddling that date, the company will be in the new regime and references to the old regime will not apply. The company is described as a ‘new entrant’. See CIRD275100 onwards for the rules that apply.

Otherwise – ie if the s357A(1) election was made within the time limits for an accounting period ending on or before, or straddling, 30 June 2016 and the company has not elected to be treated as a new entrant, there are two cases.

  • A company which has ‘new IP’, as well as ‘old IP’ which could be grandfathered (treated under the old rules), will be regarded as being in the new regime, with a separate stream for old IP assets. (The option to use the proportionate method of calculation no longer applies). CIRD275100 onwards will apply.
  • A company which is not a ‘new entrant’ and has only ‘old IP’ will remain in the ‘old’ regime until it gets access to ‘new IP’. The guidance at CIRD220400 and references to the ‘old regime’ apply in this case until the accounting period in which it gets access to ‘new IP’ or until the grandfathering transitional provisions cease, when it will be treated as a ‘new entrant’.

See CIRD270200  for the distinction between ‘old’ and ‘new’ IP. All companies will be in the new regime from 1 July 2021 regardless of ‘new entrant’ status.