The Patent Box is the most exciting new relief for innovation since the introduction of the Research & Development tax regime in 2000. It is an elective regime that will reduce the corporation tax rate to 10% on a company’s profits relating to patents. It started on 1 April 2013 but will be phased in over 5 years, so that the relief is 60% of the maximum in FY 2013, 70% in FY 2014 and reaches 100% in FY 2017.
The Patent Box is a potentially very generous tax relief but the qualification conditions and the calculations of the relief are complex and highly prescribed by the legislation. On top of that, the continued availability of the relief can be affected by group reorganisations, sales or mergers and a number of other factors.
We have already achieved successes in ensuring that clients will qualify or continue to qualify for the Patent Box relief. For example, we have worked with a trading company on the best structure for exploiting a patent they have developed, to ensure that the status of their trading company is not affected by a stream of licence income, so that the shareholders do not lose the potential benefits of entrepreneurs’ relief, if they were to sell the trading company, or of business property relief if any of them were to die as shareholders.
In another situation, we have advised on how best to preserve the availability of Patent Box relief if the client were to be sold to a much larger group. The availability of the relief goes to the heart of the value of the client to the potential purchaser, and it was vital to demonstrate that value to get the best price.
Please call me or send me an email for a free consultation on how best we can help you and your clients save tax with the Patent Box.
For a more technical article on the Patent Box, click here.