Sam Stephens
Director
In the dynamic landscape of innovation, companies are constantly seeking avenues to fuel their research and development (R&D) endeavours while maximising returns on their intellectual property (IP) investments. Two key mechanisms that play a pivotal role in this journey are R&D tax relief and Patent Box. But what happens when these two powerful incentives come together?
R&D Tax Relief: Fuelling Innovation
Research and Development (R&D) tax relief is a government incentive designed to encourage innovation by offering tax breaks to companies who are engaged in qualifying R&D activities. The allure of R&D tax relief lies in its ability to alleviate the financial burdens associated with innovation. Whether you’re developing new products, processes, or services, R&D tax relief provides a financial boost by reducing your corporation tax liability or offering cash credits for eligible R&D expenditure.
This financial boost not only facilitates the exploration of new ideas but also encourages risk-taking and experimentation. In an environment where uncertainty is inherent to innovation, R&D tax relief provides a safety net, empowering companies to push the boundaries.
Open to companies of all sizes, regardless of whether they are making a profit or loss, R&D tax relief currently boasts separate schemes for SMEs and large enterprises. However, it’s worth noting that a merged R&D scheme will be introduced for accounting periods commencing on or after 1 April 2024. This unified scheme closely resembles the Research and Development Expenditure Credit (RDEC), currently accessible for large corporations and subsidised projects for SMEs.
Patent Box: Maximising IP Returns
In contrast to R&D tax relief, Patent Box operates on a different premise, focusing specifically on incentivising companies to invest, protect and exploit their intellectual property (IP) assets, particularly through patents. This scheme works by offering a reduced rate of corporation tax on profits directly attributable to patented inventions. By providing a favourable tax environment for companies that hold patents, businesses are encouraged to prioritise the exploitation of their innovative ideas and technologies.
Companies are encouraged to disclose their patented inventions, leading to greater transparency and dissemination of valuable technological insights. This sharing of knowledge not only benefits individual businesses but also contributes to the overall advancement of technology and innovation within society.
Harnessing Synergies
While R&D tax relief and the Patent Box serve distinct purposes, they often overlap, amplifying their impact on businesses. Here’s how they work hand in hand:
TBAT Innovation: Your Partner in Innovation
At TBAT Innovation, we understand the intricacies of R&D tax relief and the Patent Box scheme, and we’re here to help you navigate the two different reliefs with confidence.
Whether you’re exploring new R&D opportunities, seeking patent protection for your inventions, or optimising your tax incentives, our team of expert R&D consultants are on hand to help. We’re committed to empowering businesses to thrive in today’s innovation-driven economy and would love to assist, Get in touch with us today.
When it comes to claiming R&D tax relief, many businesses in design-heavy industries often ask the same question: Can we claim for the cost of acquiring designs? While buying existing designs does not qualify for relief, the good news is that further work to modify, develop or improve those designs often does. If your business is undertaking technical design work as part of an innovation project, there may be significant relief available.
From 1 April 2026, all tax advisers, including those involved in R&D tax claims, must be registered with HMRC and meet new minimum standards to act on behalf of clients. This move is part of HMRC’s drive to raise professional standards, reduce fraud, and improve oversight within the tax advisory industry. Learn who will be affected by these changes and what at your business needs to do to stay compliant.
Assists organisations in accessing research and development grant funding across a range of UK and EU schemes and industry sectors.
Get In Touch