Whether you are a startup or a large established enterprise, you can get benefit from HMRC’s R&D tax relief which is remunerative funding for businesses. It helps you make higher profits, generate consistent revenue and reinvest to increase overall production quality. It also results in greater dedication to improving company goals and focuses targets, as there is more capital for investments in every department. However, there also exists another avenue through which you can maximise your relief in all capacities and this can be done by increasing your relief with the Patent Box regime.
What is Patent Box?
Patent Box is an incentive provided by the UK government that assists companies in acquiring a reduced Corporation Tax for a product that is the company’s sole patent and intellectual property. It is essential to know that applying for patents and intellectual property ownership is common across the UK. With the appropriate licensing, a relief on the tax for the research and development of such products can be provided by the Patent Box Scheme as well.
Who is Eligible for Patent Box?
Patent Box Regime is a very lucrative scheme, benefiting many companies by reducing their liable corporation tax on their company’s relevant profits. However, in efforts to mitigate abuse of the scheme, the HMRC made an addition to the eligibility criteria, according to which you need to demonstrate a contribution to either the advancement or product incorporation of the patented invention.
Your company can claim Patent Box Tax Relief if it meets the pre-requisites, i.e. your company must:
- Be subjected to pay corporation tax
- Be profitable by using patented technology commercially
- Own a qualifying patent or ‘exclusive’ licence to use those patents.
Patents granted by the UK or European IP office can qualify for the claim. Moreover, patents granted by the IPO of 13 EEA countries are also eligible to make patent box claims.
Note: You can also make a claim for a patent which was owned by some other company.
How can a company claim Patent Box Relief if they own a licence for someone else’ invention?
At times companies provide licenses to other companies allowing them to use and develop their technology and inventions. Patent Box Regime is often misunderstood in this regard; a company with a licence to use an invention owned by someone else can also claim the Patent Box Relief if they meet the following criteria:
- If they own rights to create, use and exploit the patented invention
- Possess one or more rights to the exclusion of other parties (including licensors)
- Possess “exclusivity” throughout the national border; however, the ability to manufacture or sell does not qualify as “exclusivity.”
You can claim for Patent Box Scheme even if you don’t hold patents yet. If your patents are pending, you can submit a pre-grant for that specific patent.
Can You Claim R&D Tax Relief Along With It?
The R&D Tax Relief scheme is a remunerative scheme that allows innovative companies to claim a reduction in their company’s corporation tax bill against the qualifying expenditure made. This scheme will enable companies of all sizes and domains to claim relief if they meet the eligibility criteria set by the UK government.
There’s a common misconception that a company can not claim both R&D relief and patent box. However, you can benefit from R&D Tax Relief and Patent Box Relief simultaneously via the ‘Modified Nexus Approach’, introduced in 2016 by the UK government. In our expert’s opinion, companies that undertake qualifying R&D projects and meet all the eligibility criteria of both schemes should take advantage of both schemes and get a substantial reduction in their taxable liabilities.
Want to Maximise Your R&D Tax Relief?
We’re a team of R&D Tax Relief experts with years of experience in tailoring maximised claims, digging out the hidden value in your business and handling the claim process for our clients. Whether you are a startup or a large enterprise, we can help any company from any domain get the maximum reward for their input in innovation. Our team consists of industry experts with experience in dealing with HMRC on our client’s behalf. So, if you are looking for an easier and more reliable way to claim R&D tax relief for your company, contact us. We will look into your business, prepare your claim, submit it to HMRC on your behalf, and manage it all the most seamless way. In case you are subjected to HMRC enquiry, our R&D enquiry team can handle it adeptly as well, protecting your R&D Tax Relief claim from penalty, delay or reduction.