Save Corporation Tax - the Patent Box changes in July

14/05/2016

The current Patent Box scheme closes on 30th June. GET IN QUICK to grab your company a real tax incentive that could last until 2021.

It is not too late, but time is now short, if you are considering using the Patent Box to lower your Corporation Tax on World-wide profits attributed to existing and new Patents (or other qualifying IP).  Please note that Trade Marks and Registered Designs are not qualifying IP.

With respect to Patents, you must have a pending Patent Application or granted Patent covering an aspect of the technology before the 30th June 2016, and elect into Patent Box by that deadline also – advice for which will be required from your Accountants.

The current Patent Box scheme started on the 1st April 2013 and provides corporation tax relief to World-wide profits attributed to existing and new Patents or other qualifying IP. (Note that Trade Marks and Registered Designs are not qualifying IP.) The amount of the relief increases in increments each financial year, with the top-level of relief being provided from the 2017/2018 tax year, at which time the rate of corporation tax will be 10%.

Rumour has it that a new Patent Box regime will be introduced on the 1st July 2016, but there are no published details as of yet.  It is thought that it will include some additional limitations, the most notable of which are that: tax incentives will be offered only where significant R&D is undertaken in the UK; money spent on outsourced R&D or on acquiring technology can count towards the R&D total, subject to a cap of 30% of actual R&D expenditure; and the company will need to have substantial economic activities in the UK.  Interestingly, there has been no mention of any change to the 10% rate of corporation tax – which is clearly good news for companies!

Remember, one can elect into the Patent Box whilst your qualifying Patent Application is pending, which will help you to join the present regime prior to the 30th June 2016.  The election date starts the date of relief (although this can be back-dated, but not normally by more than a year following the filing of the relevant tax return), even though the relief is only formally applied after the Patent is granted.  However, there can be financial reasons why you might not wish to make the election prior to grant of the Patent, and the timing of the election is important and must be considered and discussed with your Accountants.  

Are you maximising the relief your company should be receiving?  If you are looking into the Patent Box, you should also be claiming or considering claiming R&D Tax Relief!  Some further details are available on this website - http://www.burrowschambers.com/patent-box-and-rd-relief and HMRC’s websites - https://www.gov.uk/guidance/corporation-tax-the-patent-box and https://www.gov.uk/guidance/corporation-tax-research-and-development-rd-relief.

Our thanks go to Burrows Chambers Associates for kindly allowing us to reprint this article.

STOP PRESS - last chance to book for IP and Cyber Security – how to protect yourself a free event in Hatfield on 18th May – read more and register here.