Patent Box HMRC – What else do I need to know?

Patent Box HMRC – What else do I need to know?

We have previously covered the following questions (click on the links to view the answers):

I don’t have a patent, what other types of IP qualifies for Patent Box HMRC?

There are a number of other qualifying intellectual property rights that can be attributed to Patent Box. These include IP such as regulatory data protection (also called ‘data exclusivity’), supplementary protection certificates and plant variety rights.

What is involved in a Patent Box Election?

The opt-in is merely a simple letter to the company’s tax office stating the company wishes to opt-in under section 357G of the Corporation Tax Act 2010. The letter must also state the Company’s identity (usually the CRN and UTR numbers) and specify the first accounting period for which the election will apply.

How far can I go back to claim Patent Box?

As an example, if your limited company tax year ran from 1st April 2018 to 31st March 2019 and you were exploiting relevant IP you have until 31st March 2021 to elect in to Patent Box.

What is the “active ownership” condition?

If your company is part of a group it will need to have developed its own IP portfolio or have been actively engaged (planning and decision making) in the R&D undertaken by another group member. If this test is failed, there is no claim.

Is Patent Box HMRC right for me?

Under the current Patent Box regime, there is a very considerable administrative and financial reporting burden on companies if they wish to claim Patent Box. It is suggested a full scoping study be undertaken to understand what work is required to maintain the relevant records and how internal management systems and data recording needs to modified or introduced and balance this against the possible tax benefit. At the end of the day, only some 1500 companies within the UK have elected in to Patent Box since it’s introduction over a decade ago.

What is the Nexus ratio?

After its initial launch in 2010, the UK Patent Box regime has been subject to a number of changes driven by OECD to ensure a level playing field across international boundaries. The nexus ratio—the cornerstone of the changes to the legislation—determines the proportion of qualifying net income entitled to the benefits based on the ratio of qualifying expenditure and overall expenditure. The new Patent Box benefit calculation for post July 2016 elections is now considerably more complex and requires a significant burden of ongoing record keeping and R&D investment.

Does a patent and election in to Patent Box HMRC enhance my licencing potential?

An interesting question. If you are developing some technology that you are likely to licence in the future and you believe is patentable, then applying for and eventually securing a patent can help a future licensor to secure Patent Box tax benefits in the future. The breadth of the novelty claimed within a patent should be balanced against the difficulty of securing a granted patent in order to just access Patent Box tax benefits. Advice should be sought from a range of advisors to clarify the pros and cons. A licensor is interested in Patents for the obvious reason of IP protection, but also the tax benefits Patent Box offers.

How TBAT can help

We support start-ups and early-stage businesses looking for investment, to grow and develop by applying into the tax relief schemes. Contact us for further information.

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