Are you Prepared for the Patent Box Regime Changes?

Garbutt & Elliott

Business tax experts at Yorkshire accountancy firm, Garbutt + Elliott, are urging companies to act quickly to ensure they benefit from lower corporation tax rates using the Patent Box scheme.

As of July 1 this year, the criteria by which companies can claim for relief under the scheme is being altered to comply with an international framework.

For the past three years, companies have been able to benefit from lower rates of corporation tax on profits earned from patented inventions. Rather than the usual rate of 20 per cent, any profits gained have been subject to a lower rate of corporation tax, which has resulted in annual tax savings of tens of thousands of pounds or more for many companies.

Rob Durrant-Walker, head of business tax at Garbutt + Elliott, said: “This alteration will link the amount of relief available to the amount of research and development work undertaken to develop the patent. It will also reduce many companies’ opportunities to take advantage of the relief. It will leave some companies ineligible to claim, and those which are able to claim will have an increased amount of paperwork and record keeping.

“Garbutt + Elliott can help by preparing a feasibility report to determine a company’s suitability for the Patent Box regime, including examining what intellectual property qualifies, which proportion of income counts, and what the claim is worth.

“Our team of tax experts can also help to prepare any Patent Box scheme calculations that would be included in annual corporation tax returns and also look at how claims could be enhanced.”

Businesses that do choose to enter into the Patent Box before July 1, will be able to benefit from the terms of the current regime which will apply to all profits from patented inventions until 2021, providing a potentially lucrative period of relief.

Even businesses that may encounter a year or two of taxable losses could still benefit from electing into the current regime if they expect to be profitable in the next five years.

Rob continued: “Although some qualifying companies may not be affected, one caveat is that expenditure needs to qualify for research and development relief even if an R&D claim is not going to be made.  That could either negate claims for those who will not qualify, or result in a reduced claim for those who subcontract R&D to a different organisation.”

Companies wanting to take advantage of the current, more lenient qualification criteria must own or exclusively license-in a UK or European patent or have a patent pending. With the July 1 deadline for changes fast approaching and a registration with HMRC required, now is the time to act if companies want to take advantage of the existing system

To register for a patent or if you have a patent pending, contact Garbutt + Elliott to find out more about the Patent Box changes and how applying before the July 1 deadline could result in significant tax savings.

Working predominantly with growing and entrepreneurial owner-managed businesses based throughout Yorkshire, Garbutt + Elliott operates across a diverse range of sectors including retail, manufacturing, food, brewing, creative arts, digital media, property, construction, horseracing, charities and not-for-profit. Over the course of the past 12 months, the firm has acquired more than 300 new clients.

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