A general consultation has been launched recently on the UK’s patent box regime, which is out of step with recommendations from the OECD’s base erosion and profit shifting project.

BEPS Action 5 (Countering Harmful Tax Practices) recommends that preferential IP regimes should be based on a modified ‘nexus’ approach linking patent box benefits to where the substantial activity generating the IP has taken place. Ireland is in the process of introducing a BEPS compliant Knowledge Development Box regime which will provide a 6.25 per cent rate of corporation tax.

The consultation sets out HMRC’s proposals on how the patent box legislation will be modified to comply with BEPS Action 5, as well as requesting views on the design of the modified patent box.

HMRC published draft legislation last month with the full response to the consultation (and any comments on the draft legislation) being published in spring 2016.

Two other consultations worthy of note have also been opened recently:-

• Tax deductibility of corporate interest expense – the government is seeking views on proposals in the OECD report on limiting base erosion involving interest deductions and other financial payments. Comments should be submitted by 14 January 2016
• The Office of Tax Simplification has published key questions on two reviews that it wishes to discuss with stakeholders: Small Company taxation and Income Tax/NICs. Feedback should be submitted by 31 December 2015.

In response to a recent consultation looking at “Improving access to Research and Development tax credits for small business”, the government has announced a new plan outlining how government will make it easier for small businesses investing in research and development (R&D) to claim R&D tax relief.

The plan, ‘Making R&D Easier: HMRC’s plan for small business R&D tax relief ’ sets out that:

• From this month, small companies – with a turnover under £2 million and fewer than 50 employees – will be able to seek advance assurance on R&D tax relief.
• HMRC will explore ways to improve its communication around R&D tax relief, including looking at ways to use data and work with other government agencies to identify companies that have carried out R&D but have not claimed relief.
• Interactive guidance will be developed with stakeholder involvement.