When we speak to new clients in the Science and Technology sector, we often find that there is a reasonable understanding of the benefits of the Research and Development (R&D) Tax Credits regime, both in terms of how corporation tax reduction can be obtained for profitable companies, and also how pre-revenue or early stage enterprises can benefit from a cash incentive under the scheme. However, it is also very common that claims are not made on all qualifying projects, particularly where work is being undertaken by an SME on behalf of a larger company.
To recap on how this scheme works and how you could benefit, please read here //crmoxford.co.uk/resources/factsheets/?op=/factsheets/corporate-and-business-tax/research-and-development
However, in this article we will touch on an area which we find being missed entirely with surprising regularity.
Where we identify that the company holds, or could hold, a qualifying patent (or exclusive licence) that would entitle them to opt into what is known as the Patent Box.
This Government incentive scheme is much less understood than its more established cousin R&D tax credits, but it is often even more valuable.
In a nutshell, this scheme is designed to charge the profits falling under this regime to around 10%. This is not a tax avoidance scheme, but an incentive from Government to develop and commercially exploit Intellectual Property here in the UK.
Income covered include that from sale of products which contain a patented component, licensing income, sale of rights and infringement income. It is worldwide and not just UK income which is covered.
However, there are often misunderstandings over how this interacts with R&D tax credits, and concerns that opting into the Patent Box will prevent current and future R&D tax credit claims. These are generally misplaced. The Patent Box regime is designed to complement the R&D tax credit regime. The main time that more care is needed is in the timing of electing into Patent Box for loss making companies.
If you would like to find out more about how you may be able to benefit from the Patent Box, or R&D Tax credits, please get in touch with Alan Sowden. If you would like to examine the possibility of registering a Patent in order to benefit from the significant tax benefits of the Patent Box, we work closely with highly respected Patent Attorneys in Oxford to ensure you get the right advice.