With the introduction in April of lower corporation tax on profits for patented products and services it makes sense for firms to get as much tax relied as possible by gaining patent protection for their back office systems.
However, according to the Chartered Institute of Management Accountants, relatively few firms are doing so, even when they have invested heavily in refining their systems over the years.
Therefore the management accountant should investigate what IT developments have been made and then they can apply for patents for anything that qualifies.
The types of technical improvements that are most likely to be patentable include high-speed processing techniques, high-speed networks or other communications-related systems, large-scale data storage systems, encryption and other security aspects.
A good rule of thumb as to whether a technical invention might be patentable or not is to consider whether it might be applied in another field of technology but anything which could be regarded as a ‘business method’ should be excluded, as that would not qualify.
Once the patents are secured, the firm has a number of choices to make that could affect the amount of profits that qualify for tax relief. In order to optimise the financial benefit for the business, it will be necessary for IT development and the management accountant to work closely together, drawing in specialist support from professional advisers where appropriate.
In particular, careful consideration should be given to how the qualifying profits are calculated. In the case of patented products, this is relatively simple because all the profits generated from the manufacture and sale of each product will qualify. However, for patented systems or methods, the calculation is more complicated.