Protect your patent royalties

The Patent Box tax regime which started on 1 April 2013 is a central part of the Government’s tax strategy – giving a lower 10% tax rate (by 2017) for companies with profits arising from certain patents. It was designed to attract and encourage research and development companies in the UK.

However, Europe’s “Code of Conduct Group” spearheaded by German protests feels that the scheme gives us in the UK an unfair commercial advantage over our EU neighbours that do not have equivalent arrangements.

The result is that the existing regime will be wound up in favour of a new scheme which will have more stringent qualifying criteria, though the good news is that the existing scheme is not to be closed to new entrants until June 2016 and those already benefiting from the existing scheme can continue to do so until June 2021.

If your company is in receipt of royalty or similar income from patents, then registering and making a claim under the existing scheme is definitely recommended.

Although the exact regulations have not been published it is certain that claiming the 10% tax rate is going to be a lot tougher because the proposed altered scheme will require tax benefits of Patent Box to be connected directly to research and development expenditure, which is a related area where Richardson Swift has secured a high value of benefits over the years for companies through “R&D Tax Credit claims”. (R&D tax credit benefits also further increased in the recent Autumn Statement).

So you should seek professional advice to see if your company can benefit under the current scheme and derive a tax benefit until 2021.