The Patent Box means the tax rate on profits made from patents is to drop to just 10%…
This is a cracking way to encourage firms to patent their Intellectual Property (IP), and exploit it from here in the UK.
Any profits derived from exploiting a patent you own will be taxed in future at 10%… and not the current 20%
Patents can cost as little as a few grand to file… so should easily pay for themselves… because you get up to 20 years of paying tax at the reduced rate
So why not take a look at your IP… and take a look at Patenting some of it ?
I’ll admit that in the past I’ve been luke-warm on patents… the effort & costs just didn’t seem worth it for smaller Owner Managed Businesses given the limited commercial benefits.
The patent gives you protection… and that could boost your business’ value… and make new external funders a little more comfortable investing/dealing with you…but…
You have to tell the world your product or process secrets… and you’ll need deep pockets if you use the law to fight any patent breachers…
But this huge long-term tax break is a really great incentive to take the patent plunge.
New to Patenting?
See what can & can’t be patented & how it all works here : http://www.ipo.gov.uk/
It’s very hard to get a ‘broad’ patent (and ‘twould cost a small fortune to even try)… these may be the best to get from a commercial stand point… but for the tax break I’d go ‘narrow’
That means trying to patent something that probably won’t be a whole product… it could be a very small part of one of your products… and there might be a very small difference between it & something already out there…
The beauty of the tax break is that you get the reduced tax rate on the profits from any product that contains the patented item. So something that makes up just a tiny part of the product (say 1%) can halve your corporation tax on all profits from the whole product…
Make sure your accountants are up to speed with this. It’s been around since April 2013
And be aware that the reduced rates applies to any profits derived from exploiting your patent
* selling patented products or products that contain a patented product
* income from licensing the patent
* even any ‘damages’ you receive should you successfully sue a breacher of your patent
None that I can see… just a pity it doesn’t apply to profits whilst a patent is being applied for or ‘pending’
If you already have a patent… you can start getting reduced rates straight away…
If you haven’t got one… then look into getting one… a narrow one will be cheaper and much much quicker to get than a broad full-product one
Here’s more from HMRC about the Patent Box http://www.hmrc.gov.uk/ct/forms-rates/claims/patent-box.htm