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Tax savings on patented services

Alison Lynch, Managing Director, HowarthLynch

Like R&D tax credits (click here to see my blog on this), the ‘Patent Box’, as it is called, will become an important part of UK tax legislation. It is being introduced in April 2013, and will provide a 10 per cent tax rate on income attributable to patented services, rather than the standard 24 per cent rate of Corporation Tax. The Patent Box regime will affect Corporation Tax based on intellectual property ownership, and will cover eligible profits from worldwide sales of products protected by a granted UK or European patent. The scheme will be phased in gradually over five years.

The cost of obtaining a UK patent is typically a few thousand pounds. However, small and medium-sized enterprises (SMEs) could save several times this amount in tax under the new scheme, as well as gaining valuable patent protection.

Companies will be able to choose to pay a Corporation Tax rate of 10 per cent on profits stemming from qualified patents. The regime is not limited to patents, and may also include:

  1. Exclusivity rights
  2. Supplementary protection certificate
  3. Plant variety rights

As a rough guide, if you are a producer (either directly or indirectly) of physical objects, then the Patent Box may be relevant.

For businesses such as service providers, distributors, storers, marketers and advertisers of goods, the scope is likely to be limited.

If your company does not already have patents or has products that yield a profit but are not covered by a patent, we can help you determine the threshold at which it is worthwhile generating patent rights in order to benefit from the Patent Box.

Do call me on 01142 364457 or email me.

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