The Patent Box recently celebrated its 10th anniversary, but its uptake remains relatively low compared with claims for R&D tax relief. It was introduced as a complement to the R&D schemes to encourage UK companies to innovate, patent and then commercialise their R&D by offering a reduced rate of tax on the profit from those patented items.
Until 1 April 2023 the tax saving was 9% on profits derived from patents (10% rate compared with the main corporation tax rate of 19%). For SMEs the potential tax saving often did not justify the efforts and costs of undertaking the exercise – patent fees, complexity of the calculations, data gathering and so on.
With the main rates of corporation tax increased to 25% for profits over £250,000 - the potential corporation tax savings on patent box becomes more attractive. So now may be a good time to reconsider your company’s IP portfolio and check in on the Patent Box. For the right companies it could generate valuable tax savings.
As a starting point consider the 3 questions below – if you answer yes to them it might be worth having an initial conversation with us about whether an election into the Patent Box would be worthwhile .
Even if you don’t have patents the attractiveness of the current reduced rate of tax may mean that you should be factoring Patent Box benefit into your IP protection decisions.
If you would like more information about Patent Box, please contact a member of the Business Tax team or your usual James Cowper Kreston contact.
