The Patent Box

Latest update, 1st March 2016 - available here.

This new scheme is aimed at reducing corporation tax payable on profits attributed to patented inventions.  Whilst this scheme mainly covers Patents, some related IP may also be considered a qualifying right and benefit from this scheme, but not generally profits from other IP such as Registered Designs, Trade Marks and Copyright.   

The Patent Box started on the 1st April 2013 and applies to World-wide profits attributed to existing and new Patents, and the amount of corporation tax due is reduced in increments over the next five financial years, with 60% of the benefit being available in the 2013/2014 financial year – and following an annual increase of 10% benefit – rising to 100% in the 2017/2018 financial year.  Thus, through The Patent Box, by 2017/2018 profits on qualifying rights are taxed at only 10% corporation tax. 

To be eligible, a company must be liable to pay UK corporation tax and have a granted UK patent or a granted patent from a select list of EEA states, or it must be an exclusive licensee of a qualifying right.  A reduction in corporation tax during pendency of a patent application before grant is not possible but is taken into consideration in the relevant financial year upon grant of the patent.  The company must be involved in qualifying development, for instance creating the patented invention or significantly contributing to creation thereof, significant activity in developing the patented invention, any product incorporating the patented invention, or developing a process incorporating the patented invention.  If the company is a member of a group of companies and another has carried out qualifying development, then the company must perform significant management activity over all or almost all of the qualifying rights portfolio.

As we are sure that you will appreciate, the above is a mere snap-shot of the new scheme and further information about The Patent Box may be found through HMRC’s website
here.  We can of course assist you with IP aspects of the Patent Box, but also suggest that you contact your Accountants to understand the non-IP aspects.

An update to the Patent Box scheme can be found found through the Latest News tab, or by clicking here.  

                                           R&D Relief

Latest update, 1st March 2016 - available here.

This is not a new scheme but, now that The Patent Box is here, it is a good time to check that you are also claiming for R&D Relief (R&D Tax Credits).   

To qualify, a company’s Research & Development (R&D) project must seek to achieve an advance in overall knowledge or capability in a field of science or technology through the resolution of scientific or technical uncertainty – and not simply an advance in the company’s knowledge or capability.  The project must also be related to your company’s trade – either existing or one you intend to start through conducting R&D (as the law stands since 2009).  The types of costs that can qualify for R&D Relief are, for example: employee costs; staff providers; materials; utilities; software; and subcontracted R&D expenditure. 

There are two schemes, one for SMEs and one for large companies – the amount of relief available mainly depends upon the size of your company.  However, even if an SME, if you are a sub-contractor, you cannot claim under the SME Scheme, but you may still be able to claim, as a sub-contractor, under the Large Company Scheme.  Presently, SMEs are considered to have less than 500 employees and an annual turnover not exceeding €100m or a balance sheet not exceeding €86m, and the SME Scheme, at present, provides relief of 225% of the R&D expenditure.  Conversely, the Large Company scheme only provides relief of 130%.   

Again, we are sure that you will appreciate that this is a snap-shot of the R&D Relief scheme and more information may be found through HMRC’s website
, and we also suggest that you contact your Accountants.

Bookmark and Share