When an IP specialist sent us some information about the government’s ‘Patent Box’ scheme, TBG decided to look at how it might benefit entrepreneur’s, and small and medium enterprises (SME’s).

Definition of patent for Patent Box blog post

Patent Box came to our attention last year. Then it seemed enormously complicated and the benefits out of reach to smaller enterprises less au fait with the tax system.

Indeed, when you go looking for information about Patent Box and who it might benefit, the view that it’s the playing ground of the big boys is echoed.  NewStatesman’s Tony McKenna suggests that Patent Box is yet another way that large corporations can achieve tax breaks. Jon Ungoed-Thomas followed suit with his Sunday Times article ‘Big firms exploit patents tax break‘.

However, if you are in the business of devising and creating technological innovations then the clarification received from Cerian Jones, our Patent Attorney friend at leading IP firm UDL shows that it could well be worth considering, especially if you are the vanguard of high-tech and high-growth.

What is Patent Box?

It’s another cut from Government, but this time a cut that will benefit those businesses that have to pay Corporation Tax. It allows companies to benefit from a reduced corporation tax rate of 10% on qualifying patents. The benefits are being phased in, with the scheme being rolled out from April last year (2013) over a period of five years so the full benefits will be felt starting from April 2017.

The overall idea of the Patent Box incentive is surely that British innovation is protected and and the value of it kept within the UK. The government hope that this scheme will encourage entrepreneurship, undoubtedly with the view that a greater number of home-grown, manufactured and sold products will help grow the economy.

This is contrary to the opinion that it was yet another tax avoidance scheme for bigger companies. And certainly small companies aren’t excluded – there is a small claims track for those who meet the eligibility criteria but who have qualifying profits of less than £1,000,000.

However, it is interesting to note that some analysts suggest that as the majority of patent applications currently come from a minority of firms, very few companies are likely to grow their revenue streams using Patent Box. Perhaps this has something to do with the perceived up front costs involved in applying for a patent and navigating the financial risks and opportunities involved?

Interestingly, while it has the potential to boost business profits and cashflow, sources such as the Institute for Fiscal Studies say that Patent Box will actually lead to a “substantial reduction in government revenues” – the June 2010 Budget predicted a revenue loss of £1.1billion a year. At best this seems, on a national economy level,  a case of going backwards to come forwards. It certainly prompts questions of how exactly the figures stack up for the country and when the return on this investment is anticipated, who the incentive is really aimed at (who does the government want to keep in, or attract to, the UK?).

Before cynicism takes over, let’s get back to entrepreneurs and SMEs and how you can benefit…

Are you eligible for Patent Box?

Essentially, you may be able to benefit from the Patent Box scheme if your company:

1. is liable to Corporation Tax: individuals, partnerships and Limited Liability Partnerships cannot partake

2. makes a profit in the UK from exploiting inventions that are patented

3. owns, or is the exclusive licensee of, one or more patents granted by the UK Patent Office

4. has undertaken significant development of patented technology in the UK


5. of this doesn’t directly apply to your company, but your business is a member of a group in which another company has undertaken the above activity

What we found interesting

There are a few points that particularly caught our eye when reviewing Patent Box and how it might benefit SMEs:

– the incentive can be applied to existing, and well as new patents

– the Patent Box income can come from a product that includes a patented part, not just the patented product itself

– the 10% Corporation Tax rate can apply to worldwide profits, not only those products sold or distributed within the UK

Speak to a Patent Attorney

Whether you’re developing an invention, have patents pending, or already have products (patented or otherwise) in the marketplace, you may have dozens of questions about patents and whether Patent Box can benefit you.

If you do want more details, there’s some useful info from Cerian at UDL here: Patent Box: have you unwrapped your gift from the tax man yet?

If you’d like to explore your particular situation, it’s most probably a good idea to now seek out a good Patent Attorney and sit down for a chat with them. If you’re local to Bristol, why not come along to our ‘Marketing your technology company‘ workshop on 6th Feb 2014? We’re delighted that Cerian will be our guest speaker at this event and you can set the ball rolling on your Patent Box conversation with her in person.

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