The Intellectual Property & Science division of Thomson Reuters yesterday (June 5) published a guide outlining best practice for companies to maximise UK Patent Box tax relief.
The guide, entitled Make Innovation Tax Deductible, identifies specific strategies companies may implement to benefit from the tax advantages associated with the new UK legislation that cuts the corporate tax rate on income derived from patented technologies.
As of April 1, 2013, with the legislation fully phased in by April 1, 2017, the Patent Box scheme will reduce a company’s headline corporate tax rate to 10 per cent on goods protected by a patent, as opposed to the 23 per cent corporate tax rate currently applied in the UK.
The guide points out that, while this new tax credit provides potentially significant tax savings for companies with large patent portfolios, a very specific protocol is required to ensure that companies are maximising the benefits of the new relief.
One key strategy outlined in the guide is portfolio alignment, whereby a firm conducts a comprehensive patent portfolio audit, enabling it to demonstrate clear links between its IP portfolios and the specific UK-taxable revenues derived from each component part.
Another tip is called File Today for Yesterday’s Tax Relief, which refers to the fact that claims to Patent Box relief may be backdated for up to six years, while another suggestion is that firms should consider licensing, not just selling, as a company that sells a patented product to its customer can only claim relief on the single sale. However, by licensing a patent to the customer, they may also be able to claim Patent Box rights and share the profit.
The guide concludes that the benefit of Patent Box to companies with large patent portfolios is potentially enormous. However, it warns that navigating the UK tax system and determining which patents may provide the best tax benefits can be complex and tricky without help.