What is the patent box?
Patent box is a preferential tax scheme for profits arising from patents. The patent box allows attributable profits to be taxed at a lower rate which is calculated. The scheme has been brought into effect for profits received from April 2013 and, as with the R&D Tax scheme, can be applied retrospectively for up to two tax periods.
What is the purpose of the scheme?
The scheme has been devised to encourage technological innovation within UK based businesses. Working alongside the R&D Tax Credit scheme, the scheme enables companies to benefit from protecting IP gained. The scheme encourages businesses to locate high-value jobs and activities associated with technically innovative work within the UK.
What are attributable profits?
Attributable Profits are profits arising from items which are patented, contain an intrinsic patented item, or received via licensing of a patent. This applies to existing patents and patents pending, however the benefits cannot be realised until the patent is granted
Who can apply for the scheme?
Any company can elect to pay the reduced rate of corporation tax on profits due, if it is making a profit from a qualifying patent. The company has to have been involved in the development of patented item or the development of a product incorporating the patented item. It also has to have been developed in the UK. The patent can have been patented within National or European jurisdiction.
How do you claim?
To register a claim companies need notify HMRC that they wish to elect into the patent box scheme. Once this is done the company has to calculate the relevant intellectual property profit. This figure is then used to calculate the patent box deduction to the taxable profit. Applied as a below the line deduction this reduces the overall taxable profit, effectively lowering the payable corporation tax rate.
Jane Strugnell of MCS Corporate Strategies Ltd said, “Companies have nothing to lose by finding out more about the Patent Box Scheme. The Government wants businesses to claim and as we have found with the R&D scheme, only a small proportion of those eligible make applications.”
For further information about the scheme, you can go to the HMRC website: www.gov.uk/corporation-tax-the-patent-box. Alternatively, if you would like to have an non-obligatory chat about the scheme, MCS’s expert, Jane, will be happy to talk with you.