Some of the uncertainties surrounding the Patent Box seem to be resolving.

The Patent Box was introduced by the government as one of the measures to encourage investment and innovation in the UK, but last September a row started to brew as the favourable tax breaks came under adverse European Union scrutiny due to German concerns about artificial shifting of profits between European countries.

The row was generated when Britain – joined by Luxembourg, the Netherlands and Spain – refused to agree to curbs on patent box aimed at stopping “harmful” tax competition that were supported by 40 other countries.

Since April 2013 the Patent Box has enabled eligible companies to pay a lower rate of corporation tax on worldwide profits earned from their patented inventions. Patents granted in the UK, Europe and some other EEA countries are "qualifying IP rights" for the purposes of the Patent Box regime.

To opt into the Patent Box, a company must have undertaken qualifying development by making a significant contribution to the creation or development of the patented invention, or a product incorporating the patented invention. Companies that hold an exclusive licence under a qualifying IP right can also benefit from the tax relief in some circumstances.

You can only benefit from the Patent Box if your company is liable to Corporation Tax and makes a profit from exploiting patented inventions. Your company must also own or exclusively license-in the patents and must have undertaken qualifying development on them.

In November 2014 it appeared that the UK would have to put forward proposals to change or close

the patent box tax break, which allows income from the commercial exploitation of intellectual property (IP) to be taxed at 10%, due to pressure from Europe, mainly from Germany.

Tax experts in the UK were concerned that such a beneficial arrangement should come under threat in this way, particularly in light of comments by David Gauke Commercial Secretary to the Treasury who commented on the impact that the patent box was having on investment in the life sciences and pharmaceutical industries in the UK.

"GlaxoSmithKline has attributed to the patent box its additional investment of £500 million in manufacturing in the UK, along with the creation of 1,000 new jobs and the construction of a new factory," he said. "The UK economy will see a positive effect as a result of that."

Britain and Germany have worked together to agree a compromise which the Treasury described as a measure that would continue to “protect the interests of the UK as an excellent location for technology based businesses”.

David Gauke informed MPs that a proposal drawn up with Germany to reform the ‘patent box’, as a tax incentive for intellectual property, had been welcomed by international bodies with responsibility for tackling harmful tax practices.

In a written statement, Mr Gauke said the deal would create a regime that would “continue to incentivise innovation and its commercialisation in the UK”.

The compromise broadly restricts the tax break to R&D carried out in Britain but it has features “to take account of previously expressed UK concerns” by making it easier for businesses to qualify.

The compromise is set to bring a lengthy period of uncertainty to an end. Tax professionals are very relieved, commenting that this compromise takes us another step closer to finalising the future direction of the UK’s innovation tax regime. It will mean that companies who have been delaying significant decisions on investment can now move forward with confidence, able to translate historic R&D spends into substantial future Patent Box claims.”

Details of the new rules will be agreed by governments taking part in an international forum on harmful tax practices, as part of a global crackdown on avoidance led by the G20 group of leading nations.

As part of the agreement, countries will close their existing regimes to new entrants by 30 June 2016 and will abolish them by 30 June 2021. The Treasury said that in line with the normal tax policy making process, it would consult on the legal changes that will begin next year.