Patent Box is part of the Government’s range of incentives to encourage companies like yours to innovate and maintain the UK’s world-leading position in many sectors by incentivising them to commercialise their patents and R&D in the UK.
Are you a UK-based company that pays UK Corporation Tax?
Do you hold intellectual property (IP) which generates profit for your company?
Then, good news! You could be entitled to pay a much lower rate of corporation tax on those profits derived from your patents.
Here are 5 facts about Patent Box your business simply can’t afford to ignore:
1 – The Patent Box scheme is very generous.
The Patent Box scheme gives companies access to 10% corporation tax on any profits directly linked to the commercialisation of patents registered in the UK intellectual property office or the European patent office. What’s more, once you have elected in to the patent box scheme you can claim this relief on profits over the life of the patent. It is definitely worth your time investigating whether or not you are eligible to claim!
2 – You don’t have to make your own products to benefit from Patent Box
The Patent Box is available not only for patent owners but also those who hold an exclusive licence to a patent. So, even if you don’t have patents of your own you may still qualify!
The Patent Box applies to:
Patents granted by the intellectual property offices UK IPO and EPO;
Patents granted by the national intellectual property office of 13 EEA countries;
Medicinal & botanical IP rights (e.g. supplementary protection certificates);
Exclusive licences for patented inventions developed, exploited and defended by the licensee;
Patents acquired from another company, actively managed or developed by the acquiring company.
3 – A lot of IP related income qualifies for the Patent Box scheme
Once you have registered for the scheme you can then calculate a “patent box profit” annually for each patent you are commercialising. Profits will be calculated using revenue streams from global sales of:
products incorporating one or more patented inventions;
bespoke parts used in the patented product(s);
licence fees, royalties or proceeds from the sale of the patent;
compensation/damages resulting from patent infringements.
Following a calculation to remove various excluded costs from the patent profit, the resulting profit is then charged at 10% corporation tax rate as opposed to the standard 19%.
4 – You can claim both R&D tax relief and Patent Box at the same time
As the Patent Box figure is calculated using the relevant IP income and profits, with the R&D expenditure taken into consideration in calculations, the two schemes can be investigated in tandem.
The Patent Box is not state aid therefore R&D tax credits can still be claimed. In fact, for companies who invest time and money on eligible R&D, AND also hold qualifying IP, the two tax relief schemes can be extremely beneficial.
5 – Seek expert advice to generate maximum tax benefit
Companies need to plan and review their IP portfolio carefully, to ensure they realise the full potential of the Patent Box regime, and to comply with the recent modifications to the scheme.
With Jumpstart’s commitment to maximising our clients’ understanding and access to HMRC R&D-related tax relief schemes, we offer an assessment of your existing IP portfolio to identify whether products or processes may qualify for the Patent Box tax relief, and help to prepare the relevant figures.
We will assist in compiling and assessing associated costs and tracked profits from relevant patent protected products, and advise on:
The implications of existing R&D eligible expenditure on calculation of relevant IP income;
Managing corporation tax benefits of the combination of both R&D tax relief and Patent Box schemes;
On-going legislative changes & impact on current or future patent box claims;
We will prepare the Patent Box report and associated calculation for inclusion in your tax return.
For a free, no obligation consultation and analysis of the potential returns you might expect, contact the Jumpstart team on 0131 240 2900 or email@example.com