THE new tax year always offers businesses an opportunity to spring clean their affairs. And Patent Box legislation introduced by the UK government could shave thousands of pounds off tax bills for Scottish companies prepared to protect their innovation.
Scotland has given the world a plethora of inventions from telephones, televisions to tyres. But registering the patents for the things we now take for granted has always been crucial. Alexander Graham Bell deserves his place in history as the father of the modern telephone because he was the first to patent it in the US in 1876.
So how does it work in 2013? Well, protecting inventions remains vital to profiting from them. In a nutshell, UK companies will now be able to pay just 10 per cent instead of 23 per cent corporation tax for all profits covered by qualifying intellectual property.
With this headline figure, a company that has relevant profits of £500,000 could save £65,000 in corporation tax under the new Patent Box regime.
That’s because the tax relief applies to all relevant worldwide profits made from patented products. So, for example, a Scottish software or electronics firm that exports its products could qualify. Patented products must be new but making tiny changes to a product can make it suitable for patent protection.
In fact, applying for a patent in the UK is inexpensive compared to rest of the world and the cost will often be less than the subsequent tax relief savings.
But it’s not just big firms who are eligible for the tax relief. Businesses of all shapes and sizes would be well advised to check their assets and what is and isn’t patentable. Good news then for the 339,110 SMEs operating here.
Indeed Marks & Clerk will be hosting a special event in conjunction with HMRC and Johnston Carmichael to help SME’s in Edinburgh on Thursday. The session will explore how patent applications work and how to gain tax relief for your firm.
Scotland has long been a nation of prodigious invention. It’s time for businesses to protect and profit from their innovation.
• Tim Hargreaves is a chartered and European patent attorney at Marks & Clerk.