Is your business missing out on Patent Box relief?

The most recent Patent Box report by HM Revenue & Customs has exposed an alarming lack of awareness across the North East. Despite recording the fastest growth in patent applications, the region also recorded the fewest number of Patent Box claims. The report found only 2% of total claims came from the North East, with just 30 companies using the scheme. If your business is innovating, it is very possible that you are missing out.

What is Patent Box?

In short, Patent Box is a low corporate tax regime, introduced to drive innovation within the UK. Companies that exploit any UK or EU patents (or exclusive licensing) can enjoy 10% corporate tax on worldwide, eligible profits. Qualifying profits include:

Used alongside R&D tax credits, Patent Box makes the cost of developing a patent worth every penny. You can expect a Patent Box return to offset your initial investment significantly – if completed correctly. With such a generous incentive on offer, it is really disappointing to see so few of the North East’s ground-breaking companies benefit. We need to ensure that inventive businesses are rightly rewarded and our region continues on its trajectory as the UK’s fastest growing hub for innovation.

How does Patent Box work?

If you think you may be eligible, you can take a look at the next steps 1. The technical assessment. It is now necessary to compile information on all existing IP and patentable products, as well as any relevant projects you have on the horizon. This needs to include a schedule of all products and services relating to each patent, and the supporting documents for technical justification. 2. Forensic accounting. All relevant IP income streams must then be uncovered and validated with systems put in place to capture the required future data. 3. Submit your tax return. Once you are confident that you have all your supporting documents and evidence in place, it is time to submit your tax return.

How to calculate Patent Box

Patent Box calculation requires complex formulas and technical accounting. To prevent abuse of the scheme, a new calculation factor was added to legislation in 2016. This means you will be required to carry out separate calculations for every individual patented product, product family or IP right. With a second addition of a Nexus Fraction being needed, this is a highly specialist area of tax This means successfully claiming Patent Box relief is often beyond the capabilities of SMEs. In this case, it is best to seek the advice of an expert in this area.

How can we help?

At Haines Watts, our Incentives & Reliefs team are here to make the process easy for you. In the past 11 months, we have saved our clients millions of pounds through Patent Box relief. From consultation to money in your pocket, the process can take a matter of weeks. An easy win for your business. You can contact us here for more info on how to proceed with Patent Box.