INTELLECTUAL PROPERTY & PATENT BOX

    Protecting Your IP & Patent Box Relief

    You’ve put the hard work in. Developed new services or processes. You need to protect your intellectual property rights. There may also be opportunities for you to benefit from tax reliefs from that hard work.

    INTELLECTUAL PROPERTY RIGHTS

    When it comes to innovation and technology the protection of Intellectual Property (IP) is critical. Whether you are considering patents, trademarks, copyrights or design rights, the CP Innovation team are here to help. It is important that you hold these discussions early in your product lifecycle to ensure you receive maximum protection.

    Patent Box Tax Relief

    Patent box tax relief is a separate but complimentary innovation tax relief for companies who have developed qualifying intellectual property (IP), typically patents. The relief enables companies of any size to pay an effective tax rate of 10% on qualifying profits, rather than the UK’s standard rate (currently 19%, rising to 25% from April 2023).

    As is often the case the qualifying rules can initially seem complicated, but the CP Innovation team will work with you to ensure your company benefits from the available relief with minimum input required by your team.

    ACCESSING THE PATENT BOX BENEFIT

    Companies who own or exclusively licence qualifying IP (usually patents which have been registered in the UK, by the European Patent Office or in certain European countries), and who meet the required development condition, may be able to claim for Patent Box tax relief.

    The reduced rate of corporation tax of 10% applies to profits arising from the qualifying IP so an important step is to understand how the qualifying IP translates to income in the company. This can take the form of sales income from patented items (this category is quite extensive and includes bespoke spare parts, for example), but also royalty and infringement income. Once the income streams have been established, a methodology needs to be determined to arrive at an allocation of associated costs. Certain other adjustments are then required by the legislation.

    One important adjustment to consider is that any R&D undertaken outside the claimant company (even if still undertaken within the same UK group of companies) can adversely impact the patent box benefit, unless carefully thought through. Under these rules, known as the nexus rules, companies must track their R&D expenditure for up to 20 years, so this is an important factor to consider even if Patent Box claims aren’t currently an issue for the company. With corporation tax rates rising, can you afford to ignore the benefits of the Patent Box scheme?

    HOW WE CAN HELP

    Our CP Innovation team has extensive experience of preparing Patent Box claims, working in this field since the relief was first introduced back in 2013 and submitting some of the first claims ever made. We can help you access the benefits of the Patent Box scheme by:

    • Helping you identify qualifying IP in the company, ensuring all the relevant conditions have been considered
    • Working with you to identify the income streams arising from the qualifying IP, helping to determine an appropriate methodology to allocate costs to each income stream
    • Working with the finance team to ensure your financial reporting systems efficiently collect the required information needed to prepare the Patent Box claim
    • Preparing the detailed calculations ready for submission to HMRC
    • Advising on transactions and group structures to ensure future Patent Box relief claims can be made
    • Introducing you to Patent Attorneys who will be able to advise on patent opportunities in the company, including reviewing current R&D projects
    • Assisting with your compliance obligations to ensure Patent Box calculations are properly disclosed in your corporation tax return.

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