Patent Box Tax Relief Statistics Released

Patent Box is a Government initiative designed to incentive innovation by enabling companies to benefit from a lower level of Corporation Tax on profits attributable to the utilisation of patented technology. The scheme was introduced on 1 April 2013 and is effective in respect of qualifying profits from that date onwards, providing companies wishing to claim relief have notified HMRC within two years of the end of the accounting period in which the relevant profits and income arise.

In September 2016, the Government released statistics on the overall use and impact of the Patent Box scheme in its first year. The statistics, to be found here, are encouraging, showing that 700 companies claimed relief under the scheme; companies in London claimed the most (57.4% of the total) and companies in the North East claimed the least (0.5%). Overall, manufacturing companies were responsible for almost 65% of relief claimed under Patent Box.

Qualification to Claim

The qualification requirements for a company to claim under Patent Box are simply that it is liable to pay corporation tax and has undertaken qualifying development in respect of patents that it owns or exclusively licenses.

The purpose of the qualifying development requirement is to limit the benefit of the scheme to companies that are properly contributing to the innovation at the core of the scheme; the government is seeking to incentivise innovation so it is important that the benefit scheme is properly targeted and controlled.

Qualifying development is achieved by creating, or contributing significantly to the creation of, or performing a significant amount of activity to develop the patented invention or a product incorporating the same.

'Significant'

Government guidance on whether activity relating to the creation or development of a patent can be found on the Government definition page covering the word significant here: "there are a number of ways in which an activity could be significant. For example, it could be coming up with the breakthrough idea. Or it could be work to test or enhance the viability or usefulness of the idea. In addition, qualifying development includes developing a new application for an item – for instance, establishing a new therapeutic indication for a medicinal product".

Patent Box is certainly an incentive scheme worth considering if your business is involved with the creation or development of patented technology.

If you have any questions on the above please do not hesitate to contact the team at McDaniel & Co. on 0191 281 4000 or legal@mcdanielslaw.com.