Get Money Back from Patents – Patent Box deadline of 30 June 2016

February 03, 2016

This article on intellectual property (IP) sets out practical advice for using patents to pay a reduced rate of corporation tax, under a scheme called the ‘Patent Box’. The existing beneficial scheme is due to close to new entrants by 30 June 2016.

In April 2013, the UK Government introduced the ‘Patent Box’ scheme, a low tax regime for companies commercially exploiting inventions protected by patents. Relevant income is taxed at a lower corporation tax rate.

A worked example for 2015, here, shows a tax payable of only 12.4p in the pound.

The Problem

The Government has been under pressure to close the current scheme as it does not require a claimant to carry out any R&D activity in the UK. As a result of the concerns of several countries, the existing scheme will be closed to new entrants after 30 June 2016.

Details of a new scheme have yet to be published, but it is expected that fewer companies will be eligible, and the potential returns are currently unknown.

Fortunately, any new entrants by the above date will be able to benefit from the current scheme up to the 2021 tax year.

Getting the Most Out of Patent Box

There are two key options for having a prospect of enjoying the benefits of the existing Patent Box regime. You can apply for your own patent, or you can exclusively license in someone else’s patent covering your products or services.

To get the tax relief, there must be some qualifying income, which depends on factors including the claimant’s corporation tax base in the UK, and whether profits can be attributed to the protected products or services. The patent must be granted but once it is you can claim back to earlier years, potentially resulting in a windfall.

All patent applications must be made, and all exclusive licences registered, by the deadline of 30 June 2016. Six weeks is advisable for the drafting process.

Before the deadline, you or your accountant must write to your tax office, confirming an election to opt in.

Swindell & Pearson has helped many companies to secure patents targeted for this scheme, and to register exclusive licences, in a highly affordable manner. To find out more about how we may be able to help you take advantage of Patent Box or to discuss any intellectual property queries that you have please get in touch with your usual contact at Swindell & Pearson Ltd or Tim Gilbert at [email protected]. Tim is a patent advisor and is based at our head office in Derby.