The Patent Box

The following is excerpted from an interview with Gerard Chandrahasen published in the January edition of the Finance Monthly magazine. 

Can you give an overview of the ‘Patent Box’?

Briefly, the Patent Box is a tax regime that enables innovative UK companies to effectively halve their rate of corporate tax in respect of qualifying profits.

To qualify for the regime, profits which result from products or services sold worldwide must incorporate technology which has been patented in the UK or Europe.

The regime comes into force in stages from April 2013 to April 2017, so that by April 2017 the full tax break will be applicable to qualifying profits.

How can companies with an existing patent portfolio maximize the benefit of the Patent Box?

Only profits from products or services covered by granted patents qualify. Therefore, it is important to review your patent portfolio to determine whether your granted patents cover your current product range or service offering.

It will be useful to go through a process of identifying new innovations covering your current products and services, and applying for patent protection for those innovations to maximise the eligibility of profits for the Patent Box.

If you have pending patent applications which do not cover your current products or services, it may be possible to amend those applications to cover them and, therefore, maximise eligibility of profits.

What is the benefit of the Patent Box to companies who have yet to file any patent applications?

Now is an ideal time to investigate patents and the patent process.

The Patent Box will cover patents applied for after the regime comes into force. Therefore, if your company has built, or is building, clever technology, it may be possible to apply for and obtain grant of a patent covering novel and inventive aspects of the technology. Then any profits resulting from products or services incorporating those patented aspects will be effectively taxed at only half the current corporate tax under the Patent Box.