Only 30 North East companies are claiming Patent Box relief – is your business missing out?

Only 30 North East companies are claiming Patent Box relief – is your business missing out?

Despite being introduced nearly a decade ago, Patent Box is still one of the most underutilised reliefs in the UK tax system and nowhere more so than in our region. Only last month HMRC revealed that 2% of the total claims last year came from the North East.

Although there has been a year-on-year increase in the number of claims since Patent Box was introduced in 2013, the North East’s numbers continue to fall behind the rest of the country, with only 30 companies across the entire region benefiting from the relief.

The past few years have fostered innovation and out-of-the-box thinking, with many businesses adapting, innovating and developing new products in response to the challenges they have faced.

On the road to economic recovery, further innovation will be vital for business success. And with average Patent Box claim value in our region coming in at over £66K, the relief could be an incredibly valuable opportunity for those who are inventing.

What is Patent Box?

The relief sits hand in hand with Research and Development Tax Relief and was introduced by the Government to drive further innovation in the UK, by rewarding businesses for commercialising their intellectual property.

Patent Box allows companies who generate an income from their patents to claim an effective corporation tax rate of 10% on eligible profits – almost half of the standard UK corporation tax rate. These profits include anything from sales on patented products and products incorporating patented items, to income received as a result of breaches on patent rights.

What can be patented?

In order to be granted a patent, your invention must be new and inventive (so it can’t be just a simple modification of something that already exists), and it must be something that can be either used or made.
To ensure that your invention does qualify as ‘new’, it’s worth checking whether a patent for a similar invention has already been granted to another business. You can do so on the Government’s website here.

Many people wrongly assume that patents cost hundreds of thousands of pounds to hold, when the figure is more likely to be around the £5000-£6000 benchmark for a UK-only patent. And even then, the rewards that your company can reap from Patent Box make this initial investment much more appealing, especially if your business utilises the relief in conjunction with R&D tax credits.

Electing in early

Applying for a patent can be a long-winded process, sometimes taking up to five years. But your company can ‘elect in’ early before the patent has been granted.

This means that you can claim for the qualifying profits generated between applying for the patent and the date your patent is granted. The accumulated relief is then claimed in the tax return for the year that the patent is awarded.

Supporting your business with Patent Box

The process of claiming Patent Box involves technical formulas and as of 2016 you’re also required to carry out separate calculations for each individual patented product or IP right.

All of these complexities can be off-putting and in some cases they can deter businesses from applying at all. So having the right advisor can go a long way in helping to make the process far more efficient and stress-free.

From assessing your eligibility and calculating qualifying profits, all the way through to submitting your claim and dealing with HMRC, our tax incentives and reliefs team are on hand to support you with your Patent Box claim. Get in touch to see how we can support you to maximise your Patent Box claim here.