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Patent Box

As Northern Ireland continues to attract high-tech businesses, companies are looking to stand out from competitors and promote their innovations. Patents can be an invaluable asset to businesses who want to protect their inventions. Patents can be applied for when an invention is new, involves an inventive step and is capable of being made or used. Patents are available across a wide range of industries and while the application process can be long, if it is successful it can give significant protection that can deter competitors and boost market share.

In addition to the obvious commercial benefits, there are generous tax reliefs in place for income from patented technologies in the form of the Patent Box. The Patent Box was introduced by the Government in 2013 with the aim to keep valuable intellectual property within the UK and establish its position as the location of choice for innovative companies to develop.

Broadly, the Patent Box enables profits which are earned from intellectual property including patented inventions to be taxed at a lower rate of 10%. Companies can potentially benefit from it if they hold patents or hold exclusive licences for patented technology. Significant contributions have to be made to the development of the patented invention in order for the relief to apply.

The relief has the potential to significantly benefit a number of companies but HMRC statistics show that there has not been a substantial election into the scheme across the UK and indeed, Northern Ireland is the lowest claiming region.

Companies are missing out on vital tax reliefs and should consider whether there is potential to elect into this regime. Firstly consider whether a patent is in place or if it would be of commercial benefit to apply for one. With a successful application, the reliefs available from the Patent Box can be unlocked.

It is important to note that profits from products containing a patented component can utilise the Patent Box – it is not necessary for the whole product to be patented. It only takes one integral patented component for the profits from the product or process to be included in the Patent Box.

The Patent Box complements Research and Development tax relief so that companies can take maximum advantage of combining these Innovation Tax Reliefs on offer.  

The Patent Box can provide a much reduced corporation tax rate on relevant profits and its potential should be kept in mind when developing new ideas to ensure opportunities aren’t missed. It is worthwhile, to take the time to consider your company’s products and processes so as to ascertain whether your company could be applicable to elect into and benefit from this incentive.