Supporting innovation / Patent Box regime

As part of the government’s plans to support innovation and make the UK’s corporation tax regime more attractive to the creation and exploitation of intellectual property, you may have seen the recent announcement of the 10% tax rate Patent Box regime.

What is it?

From 1 April 2013, profits attributable to UK and European Union (EU) patents can benefit from a 10% corporation tax rate. This could bring about a significant cash benefit for many businesses. While 2013 may seem like some time away, it’s going to be beneficial to prepare early to make sure you get the maximum benefit from the relief.

One of the main points you should note is that the regime can apply to the income generated from the sales of a product which has a patented element, or patented process in production, not just on the patented element itself.

What should you be thinking about now?

Subject to the final rules which are expected in the next couple of months, we’re working with businesses to understand the potential benefits and asking the following three important questions:

• Do you know what patents your business has?
• Can you identify the income and profit related to products which have a patent associated with them?
• Can more of your innovation be patented in the future?

Based on the responses, you’ll be able to estimate the benefits of the relief and look at the actions your business can take to maximise the relief. Such actions may include the following points:

• Systems to better understand and track the income associated with patents.
• Looking at how you organise the activities associated with patents internally within the business.
• Splitting out the patent activity from the main business.
• Seeking additional patents for improvements to products or processes.

In view of the above and the time lag that can be involved, it’s important that you act early to maximise the benefits.

If you’d like to understand more or consider how to make the most of the relief please contact Paul Harris via email or call him on 0121 265 6669.