Nexus - IP transfers potentially still possible until 30 June 2016

April 14, 2016


You would be forgiven to have missed the (almost) final nexus legislation released just before Easter, but it contained some important changes to the draft legislation. It also served as a timely reminder for companies that there is little time left to ensure the patent box qualification criteria are met to qualify for the current, favourable regime.

Patent box is changing between now and 2021, with nexus phasing in to replace the current regime between now and then. Companies that qualify for the existing patent box regime before 30 June 2016 can continue to benefit from the more favourable regime for up to five years.  However with 30 June 2016 less than three months away, companies have a limited period of time left to take action, as described below.

Groups that have R&D activities and intellectual property (IP) in different legal entities could see their patent box benefit significantly reduce under nexus. Action to remedy this should be taken prior to 30 June 2016.

The draft legislation suggested a cut-off date of 2 January 2016 for some related party IP transfers to grandfather within the current regime until 2021. The good news is that the draft legislation now includes a purpose test that limits when the earlier cut-off date will be relevant.  This means that IP transfers undertaken for commercial purposes can still benefit from grandfathering.

This potentially gives some groups a short window to structure themselves ready for nexus (ideally with relevant IP, R&D costs and income in one legal entity). Indeed, HMRC anticipate companies may need to restructure for nexus and are, in my experience, open to this.

Finally, don’t forget that patent applications filed by 30 June 2016 will also be viewed as qualifying IP under the existing regime, and potentially qualify for the full five years of grandfathering.

If you have any questions please get in touch with me or your regular PwC contact.


Angela Browning

e: [email protected]

p: +44 1509 604 274