What is Patent Box Tax Relief?

Patent Box Tax Relief

The Patent Box Tax Relief Scheme is designed to encourage companies to keep and commercialise intellectual property in the UK and forms part of the UK Government’s growth agenda. Patent Box tax relief rewards UK companies that are driving innovation and developing new patented inventions and whom are now commercially exploiting them.

Companies can use the Patent Box to reduce Corporation Tax on profits. Your company could pay a reduced rate of 10% Corporate Tax on the profits associated with the exploitation of patented inventions and innovations.

The Four Pillars

Patent Box fits in with the Governments holistic approach to drive the UK’s innovation agenda. The four pillars are:

SEIS/EIS – tax relief for investors in innovative SME’s – pump primes the whole innovation journey and helps fund the commercialisation of ideas (click here for more detail)

Grants – delivered predominantly through Innovate UK, these are cash injections to help companies undertake high risk innovative projects (click here for more detail)

R&D Tax Credits – these reward companies who have invested  by taking a retrospective view of the R&D undertaken and leads to tax savings and/or cash from HMRC (click here for more detail)

Patent Box – rewards commercial exploitation of ideas and innovation through reduced corporation tax

Changes to Patent Box Tax Relief Since 2013

When first introduced in April 2013 the Patent Box regime was extremely generous and it was fairly straight forward to calculate the benefit on an annual basis, record keeping requirements were modest and the setting up of systems to collect the right data not too big a burden. However, some members of the OECD declared the scheme too generous and could have damaging effects within the international arena. As part of the OECD-G20 BEPS (base erosion and profit shifting) project changes were made to the UK Patent Box to link substantive R&D activity to any Patent Box deduction. Subsequently the scheme has now been updated leading to a more complex series of calculations and a greater burden on record keeping to under pin any claim.

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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