UK Patent Box: pay tax at an effective rate of 10%

The government is keen to support businesses that innovate and through schemes such as Research and Development Tax Reliefs (R&D) and UK Patent Box.

R&D tax reliefs reward businesses by around 25p in the £1 for expenditure on innovating to develop products or devices, processes, software or manufacturing (to name just a few examples of the areas where claims can be made). Patent Box tax relief provides a reward later on in the development process: when the intellectual property that has been created and developed by a business has been protected and patented. The reward is given by way of a reduced rate of corporation tax on any profits stemming from the patent.

With a qualifying patent, not only is that aspect of a business’s intellectual property now protected, but its image might be enhanced and its balance sheet potentially strengthened – together great indicators that this is an innovative business. This might help it not only prosper in the future but also make it more attractive to external investors and quality staff. And now, as mentioned above, the business could be eligible to claim Patent Box tax relief.

The relief provides an effective tax rate of 10% (compared to the normal corporate rate of nearer 20%) for profits achieved from sales and other income derived from the sale of patented items, or items containing patents pending. Of course, as with most tax matters, there’s a little more detail to this relief than that, but specialists in this area can help your business understand, explore and possibly benefit from the relief.

Shorts’ Radius team have a simple, unburdening two-stage ‘Appraisal’ and ‘Claim’ process for making a Patent Box claim through which we have helped many businesses in the Sheffield City Region obtain huge tax savings in this area.

So, if your innovative business does not yet have a patent and in the past you have perhaps thought that going through the process and cost of obtaining one is off-putting, I would urge you reconsider the position taking into account the potential tax savings that may be available. Considering the tax and other benefits available, it has to be worth speaking with an expert to at least explore the possibility of whether your business’s innovative work could, or should, be protected.

Radius actively seek to help our clients claim under the Patent Box regime and protect their intellectual property, along with obtaining R&D tax reliefs, accessing relevant business support and obtain grant funding. If you would like to discuss how Shorts’ Radius can help you in this area, please get in touch and me and my team will be happy to help.