The Patent Box scheme is available to companies earning profits from goods and/or services that have been patented in the UK or with the European Patent Office. It takes the form of an effective tax rate at 10% of the relevant profits compared to the UK’s usual 19% rate (25% from April 2023). There are many direct linkages with R&D tax reliefs and we can advise on all aspects.
The qualifying rules may seem complicated at first glance, however the calculation need not be, particularly with some forward thinking and upfront planning.
Accessing the Patent Box benefit
The benefits of the Patent Box scheme are substantial so, as you would expect, access to it is strictly controlled and only certain types of corporate group structure can benefit from the relief. For example, R&D undertaken outside the claimant company (even if still undertaken within the same UK group of companies) can adversely impact the patent box benefit, unless carefully thought through. This is an important part of the qualifying criteria as, under the ‘nexus’ rules, R&D expenditure is tracked for 20 years and, therefore, unsatisfactory outcomes can persist for a long period. This is a strategic issue as, although qualifying for the patent box scheme may not be important to your business to today, it may be in the future.
Fortunately, it is possible to improve your patent box position through structural approaches without significantly affecting your R&D function itself. Different business models can give rise to very different patent box outcomes and we can help you explore your options to assess the potential patent box outcome.
With corporation tax rates rising, can you afford to ignore the benefits of the Patent Box scheme?
How BDO can help
We can help you access the benefits of the Patent Box scheme by:
- Working with you and your patent attorney to review your future research and development claims to identify possible patent opportunities
- Identifying qualifying IP and revenue streams and advising on the possible methods to allocate costs to revenue streams
- Advising you on group structures and transactions with third parties that allow you to access the patent box benefit available
- Analysing different bases for calculation of patent box relief
- Developing transfer pricing methodologies and streamlining your financial reporting to automatically collect the data needed for the patent box claim
- Assisting with your compliance obligations to ensure Patent Box calculations are properly disclosed in your corporate tax return.