UK and Ireland move forward with ‘modified nexus’ intellectual property regimes

On October 22, the United Kingdom’s tax and customs authority announced a public consultation for its proposed modification to its existing patent box regime. The patent box regime is intended to provide incentives for companies that develop patents in the UK and to ensure new and existing patents are further developed and commercialized in the UK.

Also on October 22, the Irish government released the text of its Finance Bill 2015, along with an explanation of the provisions of the bill. The bill would implement the “knowledge development box” previously proposed by the Irish government.

Both the UK and Ireland proposals generally track the “modified nexus” approach endorsed by the OECD’s Base Erosion and Profit Shifting (BEPS) project, although there are some differences between the two proposals. For example, the Irish proposal would reduce the benefits available in certain circumstances where otherwise qualifying research and development expenses are deductible or are otherwise allowed or relieved for purposes of tax in a territory other than Ireland. The UK proposal does not appear to include a comparable reduction in benefits.