Use patents and save tax
by Terri Halstead - Tax Partner on 24 April 2012
I recently attended a seminar about the new government ‘patent box’ scheme that is being designed to improve the rate of return on patents.
Although not due for launch until April 2013, the patent box scheme means that the income from patents will be taxed at a corporation tax rate of 10% rather than the usual SME rate of 23%.
With the government striving to create the most competitive tax system in the G20, this is one area where they have made progress. In recent years, companies have been moving their patents offshore and this has cost the UK jobs in development and manufacturing. These changes can only help encourage companies to locate more of these jobs in the UK.
I think the scheme is good news – although some of the details need fleshing out and it remains to be seen how easy the process is. For some smaller companies or start ups the difficulty may be in assessing the value of their patents and working out how much revenue to put into the 10% ‘box’.
So what are patents and how can you utilise them?
What are patents?
Patents protect innovations that are new not obvious and are industrially applicable. The monopoly rights last for 20 years.
What can they be used for?
They can be used to prevent others from manufacturing, selling or importing the invention. You can license the invention to third parties or sell the patent to third parties. They can also be useful to obtain funding from investors.
Which patents will qualify for the patent box?
Granted GB and EP patents. The government has publish a list of EU countries whose patents will qualify, the main one being Germany.
The legislation will be part of the Finance Bill 2012 and expected to be legislation in April 2013.
Need more information?
If you are carrying out R&D and developing a product, or a process, you need to consider if there is opportunity to patent it. We can discuss with you the opportunity of patenting it and also explain how to differentiate this income in your accounts. Get in touch for more information. Get in touch for more information.
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