With Intellectual Property matters firmly in the news with the current furore surrounding Apple and Samsung, and HMRC publishing a Guidance Note on the regime earlier this month, now is a good time to look the new Patent Box regime effective from April next year.
Under the regime, a 10 percent corporation tax rate will be applied to profits attributed to patents by 2017 and this will occur in stages. In April 2013, 60 percent of the benefit will be phased in and then will increase by 10 percent per tax year until April 2017, at which point the fully reduced 10 percent rate will be effective.
In order to qualify for the tax relief a company must hold a Qualifying Patent (either granted by the UK Intellectual Property Office, the European Patent Office, or in an EEA state which has similar patentability criteria to the UK) or an exclusive licence for such a Qualifying Patent.
A company can elect to benefit from the Patent Box if it is liable to corporation tax or makes a profit from exploiting qualifying IP. A qualifying company could also own or exclusively licenses-in qualifying IP or has undertaken qualifying development in relation to qualifying IP.
If the company is a member of a group, it may qualify if another company in the group has undertaken the qualifying development.
Designed as a tax break to promote innovation, the Patent Box regime applies to companies of every size as long as they qualify under the rules. However, smaller companies should not confuse the Patent Box regime with tax credits, which can be claimed for money spent on research and development.
For any businesses who are concerned about the Patent Box regime or who wish to discuss matters relating to corporation tax, the taxation specialists at Milsted Langdon are on hand to assist.