The Patent Box regime encourages companies to retain intellectual property (IP), and the corresponding valuable jobs and associated economic benefits, in the UK by offering a reduced rate of tax on profits derived from qualifying IP.
The regime is often talked about as a 10% tax rate and to an extent this is the case, however the relief operates as a deduction from taxable profits. This means that in certain circumstances companies with taxable losses can benefit from the regime too.
HMRC statistics for 2016-17, the third year for which data was available, show that only 1,025 companies claimed Patent Box relief. However, it’s our experience that many of our clients with qualifying IP can obtain significant tax savings from claiming Patent Box relief.
UK Patent Box: pay tax at an effective rate of 10%
- Eligible companies holding qualifying IP benefit from an additional deduction against their taxable profits, the effect of which is to tax the profits attributed to the qualifying IP at a rate of 10%.
- The benefit varies considerably on a company-by-company basis as it depends on the proportion of income and expenses attributable to IP income.
- It’s also important to note that once a company has established it is eligible, relief is available for every year in which the company owns, and generates income from, qualifying IP. Bearing in mind patents have a life of 20 years, the total relief can be extremely valuable.
- There are many other non-tax benefits arising from ensuring your IP is adequately protected so it’s worth discussing the possibilities of patenting qualifying technology – if this might be relevant for you, remember publishing any details of your innovation in the public domain may inhibit your ability to obtain a patent.
Is your business missing out on Patent Box claims?
There are three tests to determine whether your business is missing out on Patent Box tax relief claims
- Is your company eligible to claim
- Do you have qualifying IP?
- Do you have qualifying income?
Our guide will help you to determine the answer to these questions.
Patent box - our simple approach
The calculations are complex but this is where specialist help will make the process so much easier
- We gather a few pieces of key information and carry out an appraisal of the potential benefits.
- If the initial appraisal indicates a claim is worthwhile, we will then undertake a fully detailed claim.
- We will liaise with you to ensure that the claim and all assicated elections are submitted to HMRC.
Contact us to arrange your free consultation
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