The Patent Box – what you really need to know to reduce your tax bill
The much heralded Patent Box scheme will apply to profits generated from patents from April 2013. But what do you really need to know?
A few facts.
The patent box scheme will apply to profits which are made from patents that a company owns or exclusively licenses from April 2013. It means that the corporation tax due on profits made from patents will be reduced from 23% to 10% but the full 10% isn’t applicable until 2017 – relief is tapered between 2013 and 2017. This a major incentive for inward investment in high tech companies to the UK. Hence GSK’s much heralded job creation in the UK after it was announced. My own view is that it doesn’t go far enough and should include other forms of IP but that is another debate for a different blog.
It isn’t just patent owning companies that will benefit – those who exclusively licence patented technology in will also benefit. However, as ever the devil is in the detail. Exclusive licensing deals normally come with a hefty price tag – after all if you have exclusive use then the licensor limits the potential licensing deals and income from other licensees. Accordingly, royalties on exclusive deals mean very much more is paid to the licensee. There will however, be a number of ways of making this a “win win “ for each party to the deal by making the licences have narrow exclusivity provisions such as narrow field of use, geographical and technology limits. This will need careful negotiation but well drafted licensing arrangements will be very attractive to business owners and shareholders.
Additionally, profits from the “whole” product sold can benefit from the reduced taxation, so if patented technology is included in your product then you could benefit from paying a lot less tax.
Research shows that in fact very few companies are preparing now to take advantage of this generous tax break, and the UK has traditionally lagged well behind other countries when it comes to filing patents and protecting its technology. (I feel another blog coming on!) It is such a shame our attitude to patenting in the UK is so negative but as ever the well prepared and organised technology businesses stand to win this game.
I also foresee that some companies who have invested heavily in patenting their technology will be targeted for take over’s and acquisitions from now onwards. As ever, it pays to get good advice early on. If you’d like to chat this over with us, then do feel free to call and ask for further information on this.
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