Intellectual Property | Tax Incentives On Commercialising Intellectual Property

It has been announced that in April next year the Government will introduce a scheme called Patent Box, which is a low-tax regime offering generous tax allowances on the commercialisation of intellectual property.

Under the scheme, companies will only pay 10 per cent tax on worldwide profits generated from patents granted by the UK Intellectual Property Office or the European Patent Office.  This will apply to sales income, licence fees, royalties and income generated from the sale of patents.

This is a £1bn+ scheme, which is potentially one of the most significant tax incentives ever introduced in the UK.  However, some small firms are worried that the financial and administrative cost of claiming could be prohibitively high and fear that the advisory costs they will incur and the administrative burden of filing a claim will outweigh the cash benefit.

Jonathan Bridges, associate partner at KPMG in the UK, said, “The Patent Box regime is an extremely attractive tax break for businesses with qualifying profits.

“Many large businesses with significant intellectual property-based profit streams are already closely examining the potential tax benefits it may bring them. But we have noticed that many smaller businesses do not appear to have considered what savings are available to them from the Patent Box’s 10 per cent tax rate.”

Other experts say that a point to note are that patents must be granted for the relief to apply; for patents pending any income should be logged and the tax relief claimed upon grant.

Also, companies must take an active role in the development of the invention to which the patent applies, as passive ownership is not enough.  And entry to the patent box regime is by election, not automatic.

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