What are the tax reliefs and incentives available for my new technology product?

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Dear Simon,

I have been living in London for six years now and I registered my new business in 2013. I am presently trialling a new technology product that is potentially a great aid for supporting independent living for the elderly and other vulnerable people. It has a patent pending for the UK. I’d like to extend it to the EU and other countries where the market opportunity is huge but it seems to be very expensive. I have also been told that there are various tax reliefs and incentives that I should take advantage of. This is not an area my brain likes to think about as I am more of a creative person but I know it is important.

Could you please tell me more about the tax reliefs and incentives, what they are and what I need to do to claim them.  Are you also able to advise me on patents and intellectual property, and how I can extend this outside of the UK for a fee that is affordable for a small business, not yet bringing in a high income? (But with huge future potential). Thank you.

Katrina

The Patent Box is an attractive tax saving – but you need to act soon to be eligible.

Simon Newsham

Dear Katrina,

Many thanks for your letter. Your technology sounds very exciting and to be of huge benefit to a great number of people in need. I am assuming that your new business is being carried out through a UK private limited company and the technology is owned by your company (not in your own name). This is important because the various tax reliefs can only be claimed by companies, not individuals.

In terms of tax reliefs, the Government introduced the Patent Box to great fanfare with effect from 1st April 2013. The aim was to provide an attractive tax regime for companies to locate their development, manufacture and exploitation of patents in the UK and formed part of the Government’s wider vision to position the UK as a world leader in patented technologies.

The Patent Box (broadly) allows qualifying companies to be taxed at an effective rate of 10% on their worldwide profits arising from qualifying patents and certain other intellectual property (IP). The full benefit of the regime was to be phased in over four financial years with the full relief being given with effect from 1st April 2017.

The recent Autumn Statement announced that the tax relief will be increased from 225% to 230%. This means that for every £100 spent, a tax deduction of £230 can be claimed. This can make a huge difference.

However, a number of our European partners, in particular Germany, believed that the Patent Box was a form of State Aid (which is not allowed by the EU). This has led to the UK very recently agreeing to close the Patent Box regime to new entrants in June 2016 and to abolish it altogether by June 2021. Whilst the details have yet to be finalised, there is a limited opportunity to take advantage of this regime and you should consider your eligibility relatively soon.

Another form of tax relief concerns research and development (R&D). Broadly, the R&D tax regime allows companies to claim an enhanced tax deduction and for those companies which are loss-making, usually in the early years when the technology has yet to be fully commercialised, to claim cash payments back from the Government. The recent Autumn Statement announced that the tax relief will be increased from 225% to 230%. This means that for every £100 spent, a tax deduction of £230 can be claimed. This can make a huge difference.

Filing patent registrations, particularly on a global basis, can be prohibitively expensive. However, there can be cheaper and yet highly effective alternatives and we should be delighted to discuss the available options with you.

Simon Newsham

If you have any questions, please do not hesitate to contact Simon Newsham at snewsham@wslaw.co.uk Tax Partner at the law firm Winckworth Sherwood or visit www.wslaw.co.uk

 

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