The Patent Box: no-ones talking about it!
Working in the R&D tax credits sector we constantly see impressive developments driving forwards the baseline of science and technology, and along with it the creation of a client’s valuable intellectual property (IP). Consequently, we’re often discussing if a client has protected, or should protect, their IP.
The IP of a business is invaluable and can play into the long-term success of a company; building a reputable brand, consumer recognition and trust. For many, the perceived cost and complexity acts as a barrier to applying for patents, but companies, particularly those carrying out qualifying R&D, should really as a matter of course assess their eligibility to protect their IP.
A patent means you:
1. Protect your IP for 20 years (the lifespan of the patent);
2. Support your research and development work (if you’re making an advance in a field of science or technology, naturally, you should be considering its protection); and
3. Benefit from significant tax savings (by claiming Patent Box tax relief on profits generated by the patented technology).
The Patent Box
The Patent Box tax relief scheme reduces your corporation tax rate on profits arising from patented sales. For eligible profits, the effective rate of corporation tax is 10% which, in an era where CT rates have been hiked up to 25%, represents a significant tax saving. This is why, at YesTax, we’re always talking about it!
What more, the 10% rate is potentially applicable to a large product which houses a relatively small patented component.
Are you eligible to patent a product or process?
The scheme’s eligibility, requirements and calculations can be complex and companies must carefully track and calculate profits attributable to the patented technology.
When it comes to assessing whether your product or process is patentable, you should consider the following:
1. Are you about to launch a new product or process?
If you’ve already launched it, consider question 3.
2. Is there anything technologically unique about it?
This can be any new feature or new combination of known features that works in a new way. For software products/processes, this can be tricky. If the software operates a machine or technological system in a unique way, that’s much more straightforward.
3. Is it still secret?
If the only people who know about it are in your company or are legally obliged to keep it confidential, then that’s fine. If not, that may prevent you from getting a patent.
4. Do you expect to make more than £100k of taxable profit within the next 5 years?
If you do, the chances are that the tax saving will more than cover the cost of obtaining the patent in the first place.
What next?
If you would like to discuss your eligibility, or if you already have registered patents in the company, we would be pleased to speak to you. We can assist at all stages and assess your entitlement and scope to make significant tax savings.
Contact YesTax on 0114 553 7850
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