Could you benefit from the patent box?
Businesses do not always apply to patent their inventions. They may consider the cost to be prohibitive and trust their ability to keep the invention secret. Alternatively, they may consider technological developments in their sector to be so fast moving that there is no point in patenting. Or reliance may be placed on other intellectual property rights, such as copyright (common in the software industry). Many businesses may not even appreciate that they have created a patent or process that is potentially patentable. As a result, the UK ‘underpatents’. The advent of the patent box — which came into effect last April but has so far had a low profile — should prompt a re-think. Even if the commercial benefits of patenting may be marginal, the tax break should incentivise businesses to start patenting. It is important to emphasise that the invention need not be world changing — a new generation of smartphone, for instance, or a pharmaceutical wonderdrug. A new brew basket for an espresso machine, for instance, might be eligible, or the process for creating a new type of drink.
The patent box enables companies with qualifying patents to tax the profits arising from those patents at an elective reduced corporation tax rate of 10 per cent. The regime is being phased in so that the full reduction will not be available until 2017. Until then, companies seeking the reduction must apply an appropriate percentage to the profits earned from patented inventions at a transitional rate. For the period 1 April 2014 to 31 March 2015, the rate is 70 per cent; it will be 80 per cent from 1 April 2015 to 31 March 2016.
To be eligible, the company must own or exclusively license-in patents granted by the UK Intellectual Property Office, the European Patent Office or the following countries in the European Economic Area: Austria, Bulgaria, the Czech Republic, Denmark, Estonia, Finland, Germany, Hungary, Poland, Portugal, Romania, Slovakia, Sweden…
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