Background and business opportunity
The UK government has recently issued a discussion document on offshore IP management with possible UK tax implications in situations where the IP has been developed in the UK and later transferred offshore. A 10% rate of corporation tax on the “Patent Box” has been proposed to encourage IP-types of business. The rules are being reviewed to see whether “active IP management” offshore takes place in a situation where the UK company hives off certain activities offshore. This could represent a new business opportunity for Jersey trust companies if they acquire the skills necessary for proper “IP management” offshore to qualify for exempt CFC status.
The criteria for active management of IP offshore
Where the offshore company undertakes sufficient IP management activity it could qualify for exempt CFC status. Where it appears that some elements of the active management are conducted in the UK and others outside the UK, partial exemption might be available.
Criteria for active management of IP through an offshore company include:
- Development of IP through marketing activities offshore;
- Obtaining and organising legal protection of IP (e.g patent, trade mark protection);
- Setting, directing and monitoring brand advertising;
- Protecting rights from infringement;
- Quality control.
There are many other types of management activities and the list is not intended to be comprehensive.
It is possible for the offshore company to subcontract out various IP management functions to third parties or group company members.
Active IP management via an offshore base such as Jersey or Guernsey can therefore be a good source of business in the future.