Patent Box

Small business owners are missing out on millions of pounds in Research and Development (R&D) tax relief and Patent Box tax relief.

Patent Box relief offers businesses a reduced rate of corporation tax on any income made from patents and, like R&D tax credits, was brought in to reward and incentivise greater innovation. Under the terms of the relief, the profit made from exploiting patents that a business has attracts corporation tax at a reduced rate of 10 per cent.

Patent Box relief applies to profits derived from the licensing or sale of patent rights, sales of a product incorporating the patented invention anywhere in the world, use of the patented invention in the company’s trade, known as notional royalties, and compensation from third parties who have infringed the firm’s patent rights.

However, recent research shows that while the number of Patent Box claims has risen each year since its introduction, more than half of UK companies are still unaware that they can pay less tax on profits if they have a patent. Meanwhile, although more than 40 per cent of the businesses polled had been granted a patent, 39 per cent of them had never applied for Patent Box tax relief.

According to Government figures, more than 5,600 patents were granted every year between 2012 and 2017, but the number of Patent Box claims over this period peaked at 1,160 in 2015/16 totalling £754.3 million. This can only mean that the thousands of eligible firms are missing out on literally hundreds of millions of pounds.

Rob Chedzoy, Tax Partner at Milsted Langdon, said: “It is clear that many businesses are missing out on the tax reliefs that are associated with research and development and Patent Box relief.

“If you are a business owner who is unsure of the range of tax reliefs that could help save your business money, then please contact our experts today for a discussion about the options available to you.”

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