Could the Patent Box benefit your business?
As has been well publicised since its introduction in April 2013, the Patent Box allows companies to benefit from a lower rate of Corporation Tax on profits derived from patented inventions.
As of April 2014, the main rate of UK Corporation Tax is 21%. However, the Patent Box provides a lower rate of 10% Corporation Tax for profits derived from certain activities (with a caveat that the full relief provided by the Patent Box will not be available until 2017).
This lower rate of Corporation Tax is available to companies which own or licence-in a qualifying patent, and which have undertaken a certain amount of development on the patent.
At present, the Patent Box is restricted to patents granted by certain patent offices, these being:
• UK Intellectual Property Office (UKIPO);
• European Patent Office (EPO); or
• Certain countries in the European Economic Area (EEA): Austria, Bulgaria, Czech Republic, Denmark, Estonia, Finland, Germany, Hungary, Poland, Portugal, Romania, Slovakia, and Sweden.
In order for the lower rate of tax to apply, the profits must be derived from at least one of the following:
• selling patented products – that is sales of the patented product or products incorporating the patented invention or bespoke spare parts (even if the patented element of a product is small)
• licensing out patent rights
• selling patented rights
• infringement income
• damages, insurance or other compensation related to patent rights
• a company may also benefit from the Patent Box if it uses a manufacturing process that is patented or provides a service using a patented tool
With the above in mind, it is highly recommended that companies understand the benefits available to them, and to review their activities to establish whether the necessary criteria to take advantage from the Patent Box are met, and, if not, to implement a strategy which will allow for maximum benefit to be derived.
Furthermore, whilst claiming Patent Box relief is, in theory, relatively straightforward, in that companies “merely” have to make an election in writing when filing a Company Tax Return, the reality is that the calculations are quite complex, and onerous, and should be undertaken with caution.
At TLIP we have a number of highly experienced Patent Attorneys who can review existing patent portfolios and advise on the best strategy to maximise the benefits which Patent Box offers, and we also have a network of experienced accountants who can advise on the process involved in electing into the Patent Box, and gaining the maximum advantage possible.
If you would like more information on the Patent Box then do not hesitate to get in touch.