‘Patent box’ opened up for tax breaks

A SCOTTISH accountancy firm has devised a method to help small businesses use the “patent box” introduced by former chancellor Alistair 
Darling, which gives tax breaks for profits made on ideas and inventions.

Current chancellor George Osborne backed the patent box concept in 2010 during his maiden Autumn Statement, giving companies the chance to pay 10 per cent tax on profits from their patents rather than standard corporation tax at 24 per cent or 20 per cent.

The tax break comes into force on 1 April, but many small businesses have said the 60-odd pages of guidance on how to apply for the patent box are too confusing.

Now mid-tier accountancy firm Johnston Carmichael 
has been working with HM Revenue & Customs to make it easier for small businesses to use the regime.

The taxman has rubber-stamped the firm’s efforts, which involved sitting two 
clients – Aberdeen-based oil and gas pair Titan Torque and Wireless Engineering – down with HMRC and working out the guidelines to see which parts apply to small firms.

Making the patent box simpler to use was the brainchild of corporate tax director Susie Walker, who works in the firm’s Edinburgh office.

“Using the patent box involves steps such as valuing your company’s brand, which is straightforward if you’re a big company but much harder if you’re a small business,” she told Scotland on Sunday.

Walker joined the practice last year after 20 years with Bank of Scotland, HBOS and latterly Lloyds Banking Group as group tax director.

She led Lloyds’ negotiations with HMRC on tax matters 
following the introduction of the Banking Code.

“One of the big challenges for small businesses was working out a return on their marketing assets,” Walker said.

“This is one of the areas that we put to HMRC, and it accepted that this was a problem and is now working up questions that can be asked of small businesses to satisfy HMRC.”

Walker had a three-month placement with HMRC before joining Johnston Carmichael.