On Monday of next week a new tax called Patent Box will come into force that will mean that firms with intellectual property (IP) that qualifies under the new rules will be able to reduce their corporation tax bill.
From 1 April 2013, 60 per cent of the IP tax benefit will be phased in and this will rise by 10 per cent every year until April 2017 when the fully reduced rate becomes effective. Patent Box will tax the worldwide profits attributable to patents at 10 per cent rather than at 23 per cent.
According to HM Revenue & Customs, firms can only benefit from the Patent Box if they are liable for Corporation Tax and make a profit from exploiting patented inventions.
The firm must also own or exclusively license-in the patents and have undertaken qualifying development on them, or, if a firm is a member of a group, it may qualify if another company in the group has undertaken the qualifying development.
Firms can benefit if they own or exclusively license-in patents granted by either the UK Intellectual Property Office, the European Patent Office or many countries in the European Economic area.
The firm or another group company must also have undertaken qualifying development of the patent by making a significant contribution to either the creation or development of the patented invention or a product incorporating the patented invention.
With the introduction of the Patent Box and the proposed improvements to the R&D tax regime, the Government claims to be promoting the UK as ‘the place to be’ for innovative businesses and hopes it will give firms a new incentive to protect and commercialise their patents.
Mackrell Turner Garrett Solicitors in London
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