Patent Box

Reduce your Corporation Tax to 10% with MPA

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What you need to take advantage of the Patent Box regime

To make a patent box claim all you need is UK and / or EU patent and to be liable for Corporation Tax. Companies with patents pending can still elect into the regime but will have to wait until the year in which their patent is granted to receive their tax relief.

If you’re not sure whether you qualify or when to elect into the regime for maximum benefit, get in touch with our team for further information.

What is Patent Box & how do I qualify?

Patent Box is part of the government’s growth agenda. It presents a financial incentive to develop and commercialise innovative technology in this country. Put simply, the government wants to pay companies to invest in innovation and the Patent Box scheme is one of the tools it’s deployed to do that.

Patent Box enables UK companies to pay a reduced Corporation Tax rate of 10% on profits resulting from the sales of products or services containing a qualifying patented innovation. Many patented inventions are often small technical improvements on existing products or processes, which can yield substantial returns. HMRC have reported that £942m has been claimed through Patent Box relief in 2016/17. With 1,025 claims made; only 3% of companies with eligible patents and claiming R&D tax credits are taking advantage of this benefit.

3%

of eligible companies claiming both R&D and Patent Box

1,025

companies claimed Patent Box in 2016/17

£920k

average claim value

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What you need to take advantage of the Patent Box regime

To make a patent box claim all you need is UK and / or EU patent and to be liable for Corporation Tax. Companies with patents pending can still elect into the regime but will have to wait until the year in which their patent is granted to receive their tax relief.

If you’re not sure whether you qualify or when to elect into the regime for maximum benefit, get in touch with our team for further information.

What our clients say…

VIEW CASE STUDIES
“Revenue generated from these claims helps us to maintain the profitability of the company – as well as keeping the owner happy, which is essential. This then allows us to continue to invest in R&D and develop new products.”
Ray Hillhouse General Manager of Morgana Systems
“For a company like mine, working with MPA has made a really positive impact. They have the expertise to take the complexity out of government tax schemes designed to help business invest and grow and the experience to ensure that other related schemes, like R&D tax credits, are combined to maximise the benefit to tp24. With MPA’s help we can use these reliefs with confidence.”
Shaun Davis Managing Director at tp24

3 stage delivery process

Our aim is to make the application process as easy as possible and as part of our 3 stage delivery process we conduct on site client meetings to understand the technical aspects of the patent and to evaluate its value.

Stages

1Patent/product technical assessment

  • Work together to identify and validate your existing IP along with your current / planned innovation projects across your business and group
  • Assess the potential benefit of making a Patent Box election and determine the appropriate time frame considering the new rules and transitional arrangements
  • Compile a schedule of products and services that are associated with the qualifying patents or may qualify because they are sold alongside other qualifying products or services
  • Document the engineering justification for all products and services identified in relation to the qualifying patents
  • Define the valid relationship between R&D expenditure, qualifying patents and associated revenues

2Forensic accounting

  • Develop a valid income streaming methodology and where required gain comfort from HMRC regarding key aspects
  • Validate and jointly agree the apportionment of costs and R&D expenditure
  • Help you to implement internal processes to capture required data
  • Apply current legislation to calculate Relevant IP Profit

3Submit your tax return

  • Make the election to join at the appropriate time
  • Integrate Patent Box deduction into your year-end tax computation and provide supporting tax analysis
  • Identify the total tax saving
  • Receive your benefit from HMRC

Why get a patent?

A patent can cost as little as £5,000 and be granted in 9 months. When measured against the Corporation Tax saving that could last for 20 years, the benefits are huge.

Remember, the tax reduction can be applied to worldwide revenues and companies can make the most of the tax regime whilst still preventing their invention from being copied. View a patent box claim worked example.

Old rules vs new rules

From 1st July 2016, the UK Patent Box regime was changed. Under the previous Patent Box rules, as long as a UK company owns a UK or EU patent (or exclusive rights to that patent), all worldwide sales derived from that patent going into the UK company may be included in a three-step Patent Box calculation to produce the Relevant Intellectual Property (IP) Profits. There was no requirement for a connection to be made between the underlying R&D activity and the Patent itself.

Although the basic calculation for Patent Box remains the same, the modified rules include an additional calculation based on a ‘modified nexus’ approach, linking relevant R&D expenditure to the patent or patented item. This has made it necessary for companies to ‘track and trace’ their R&D spend and map the data to their IP.

Industrial experience and expertise

Description of person

Beverley Wood

Tax Manager

With both ACCA and MAAT qualifications; Beverley has over a decade of accounts and tax experience supported by an international portfolio of clients.

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Lisa Baum

Senior Tax Specialist

CTA and ACCA qualified, Lisa has 15 years' experience working with a broad range of technology-based clients across several sectors.

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Stuart Bentley

Delivery Manager

With a PhD in Manufacturing Engineering and years of industry experience, Stuart’s technical knowledge is invaluable in determining the qualifying activities and costs in clients projects.

Ready to get started with your claim?

If you are ready to make a claim, speak to one of our tax experts or for more information about Patent Box, visit our resources section.

Learn about how to make a claim

We know that R&D and Patent Box can seem confusing. So, for answers to your questions visit our knowledge hub.