In short, the government wants to compensate companies who invest in growth and innovation within the UK. It’s dual intent is to increase confidence within UK companies who wish to innovate, and to discourage the repatriation of profits from innovation, to lower-tax regimes.
Alongside R+D tax credits, the Patent Box forms part of this strategy, encouraging SME’s to indulge in New Product Development (NPD) and the launch of inventive and profitable products.
Under Patent Box schedules, UK companies pay a reduced Corporation Tax rate of 10% on profits which are accrued as a direct result of qualifying patents formed of intellectual property (IP). This includes patentable elements within larger systems and products, which contribute to competitive advantage.
Commonly, patented inventions are small incremental innovations based on existing products, methodologies or processes. However, in a highly technical world, they can yield significant competitive advantage and associated revenues.
To illustrate this, HMRC reported that £942m has been already claimed through the Patent Box Schedule in 2016/17. Since 2016 the full value of claim has matured to 10% meaning that significant tax benefits can be achieved by companies with qualifying patents.
To be eligible, a company must have undertaken qualifying development by making a significant contribution to the creation or perfection of a patented invention. This also applies to a product incorporating the patented invention. Companies that hold an exclusive licence under a qualifying IP right may also benefit from the tax relief under the Patent Box regime.
As a specialist Design and Innovation company we have had significant experience of the development of unique IP and can advise on patentability and potential areas for innovation within your company’s product development process. We can also offer a full Patent Box service to identify eligible patents, and to complete the detailed process of application.
For more information about the Patent Box system please follow the link below to the governments Guidance notes. If you think that your products may qualify, then please get in contact with us to discuss how we can help, with no obligation.