Patent box: Why time is a scarce resource
October 06, 2015
The pressures of modern business mean that Patent Box claims have been put off by many companies - but time is running out. Making a claim takes work and time, especially for companies with a large portfolio of patents or lots of different products.
The first critical deadline is approaching fast. Companies with a December year-end have until 31 December 2015 to make their Patent Box claims for the 2013 financial year. There’s a strict two-year limit on making Patent Box claims, so if you’re not ready by December 31, you will lose what could be an extremely valuable entitlement. 31 March year ends have until 31 March 2016 to claim.
The Patent Box relief applies to worldwide trading profits from patented inventions – the important point is that you only need one patent for the entire product to qualify. So, for instance, a patented invention in a car’s exhaust system is often enough for the entire vehicle to qualify; or a patented ingredient will bring a food product into the regime. And you don’t need to own the patent rights outright – an exclusive licence to exploit the patent is enough, as long as the company or group has developed the invention or product.
The key is identifying and tracking these individual patents – until Patent Box came into being there was no need for many companies to record exactly how their patents were used. But now there is, and so systems and processes will need to be put in place.
Obtaining a list of globally owned patents and licences is easy enough; finding where each has been applied is more of a challenge. The starting point will probably be a detailed conversation with product development or the R&D department. In fact, the exercise will most likely require many cross-department conversations – between the tax department, the legal team and R&D/product development at the very least. Even in a relatively simple case where a company has few products, getting all the information together can take weeks. A focused and efficient process will help – and a degree of pragmatism will help.
Another significant deadline is 1 July 2016, when the modified nexus regime is phased in for new entrants and patents filed after that date. While we still don’t know the full details of the new regime, it’s important that any companies that will be creating new patented IP on an ongoing basis assess now if their current R&D ownership and IP model is really fit for purposes. If changes to the legal arrangements are needed, these could take time to put in place.
There’s still time for companies to elect into the current Patent Box regime, if that suits them better, as it will continue to run parallel to the Modified Nexus regime until 2021. But once again, there’s a strict time limit in place – so act now, before it’s too late.
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