Patent Box

THE PATENT BOX
Benefits, Challenges &
Financial Implications
© Copyright 2013. ClearViewIP Ltd. All Rights Reserved.
www.clearviewip.com

 The UK Patent Box was brought into force on 1st April 2013
 Over the next 5 years the Patent Box will progressively reduce
Corporation Tax to 10%
on profits derived from patents worldwide
 The UK Patent Box only applies to companies in the UK
WHAT IS THE PATENT BOX?
2

HOW DOES THE PATENT BOX AFFECT MY DEPARTMENT?
3
- To take advantage of the Patent Box,
UK companies will need to ensure
There is collaboration between:
 IP Department
 Finance Department
 Sales & Marketing Department
 R&D Department
INTELLECTUAL
PROPERTY
FINANCE
DEPARTMENT
RESEARCH &
DEVELOPMENT
SALES &
MARKETING
PATENT
BOX

INTELLECTUAL
PROPERTY
FINANCE
DEPARTMENT
RESEARCH &
DEVELOPMENT
SALES &
MARKETING
PATENT
BOX
• Review and optimise the filing strategy, including:
– Filing patents with a narrow scope, to reduce
examination period
– Maintaining patents, which may have been
abandoned, if they provide tax advantages
• Better understand the link between patents in the
portfolio and products sold by the company
THE IP DEPARTMENT
4
IP Department will need to:

THE FINANCE DEPARTMENT
5
• Coordinate the Patent Box Project:
– Interacting with other company departments
– Ensuring finance & tax professionals can
realise potential tax savings & calculate
them accurately
Finance Department will need to:
INTELLECTUAL
PROPERTY
FINANCE
DEPARTMENT
RESEARCH &
DEVELOPMENT
SALES &
MARKETING
PATENT
BOX

SALES & MARKETING DEPARTMENT
6
INTELLECTUAL
PROPERTY
FINANCE
DEPARTMENT
RESEARCH &
DEVELOPMENT
SALES &
MARKETING
PATENT
BOX
• Consider a new element in pricing &
presentation mix:
Eg. It may be beneficial for a necessary
patented component to be sold together with
the main product, if the main product is not
patented, to achieve tax relief for the whole
package
Sales & Marketing Department will need to:

R&D DEPARTMENT
7
INTELLECTUAL
PROPERTY
FINANCE
DEPARTMENT
RESEARCH &
DEVELOPMENT
SALES &
MARKETING
PATENT
BOX
R&D Department may want to:
• Develop patentable product features which
previously may not have seemed appropriate

Entities subject to UK Corporation Tax can take advantage of the Patent Box when they:
HOLD EITHER FULL OWNERSHIP OF OR AN EXCLUSIVE LICENSE TO A QUALIFYING PATENT
(granted by UK, EPO or other European Patent Offices) which protects a product/service or process, a product component or spare parts)
HAVE SIGNIFICANTLY DEVELOPED, ACTIVELY MANAGED OR EXPLOITED THE PATENTED INVENTION
DERIVE PROFITS FROM:
 WORLDWIDE SALES of patented products/services, of a component/spare parts or from use of a patented process
 WORLDWIDE LICENCE FEES AND ROYALTIES from licensing or sublicensing qualifying patents
NB. This can cover fees for other IP rights included in the same licensing agreement (e.g. know-how, trade mark)
 INCOME FROM SALE of qualifying patents
 COMPENSATION DUE TO INFRINGEMENT of qualifying patents
 THEORETICAL ROYALTIES equal to what the company would have received if qualifying patents had been out-licensed where
patented process or item is used internally
DO I MEET THE CRITERIA?
8
1
2
3

Over a 5 year period, the Patent Box tax
regime will halve the Corporation Tax
rate to 10% on profit derived from
qualifying patented products or services
The chart shows how the decline in
corporation rate will be staggered.
WHAT IS THE TAX SAVING?
9
14%
• 2013/14
13%
• 2014/15
12%
• 2015/16
11%
• 2016/17
10%
• 2017/18

Adjust trading profit (see HMRC CTA10/S357CG) by adding R&D relief and appropriate debits and credits
for loan and finance income
Allocate a proportion of company’s total UK taxable profits, before interest, to IP related income
NB. A more complex method is to use income streaming to allocate expenditure between qualifying and
non-qualifying income.
Remove routine profit to work out Qualifying Residual Profit: calculated as 10% of company’s expected
revenue without IP (Routine Costs include staff, premises, plant & machinery, transportation, professional
services N.B. Raw materials, goods for resale, expenditure qualifying for R&D tax credit not included)
Remove theoretical marketing royalty equal to royalty company would have paid 3rd party to make use
of brand and other marketing rights. SMEs can deduct 25% of patent profit as marketing royalty. When
QRP exceeds £3 million, the return on marketing assets is calculated based on transfer pricing techniques.
HOW DO I CALCULATE THE TAX SAVING?
10
STEP 1
STEP 2
STEP 3
STEP 4
The UK Patent Box is calculated using a four step formula:
10% RATE: Remaining profit constitutes patent profit used to calculate Patent Box deduction,
bringing the effective corporate tax rate paid to 10%.

EXAMPLE: CALCULATION GUIDE IP Income
Non-IP
Income
TOTAL
Worldwide Turnover - £32,500,000 £17,500,000 £50,000,000
Taxable Profit - £7,000,000
1: Added R&D Tax Credit - £2,000,000
2: Attributed Taxable
Profits Pro-Rata
- £5,850,000 £3,150,000 £9,000,000
3: 10% Routine Profits Deducted from £8m costs (£520,000)
Qualifying Residual Profit - £5,330,000
4: Deducted Marketing
Royalty
QPR > £3m, so calculate
based on transfer pricing.
Assume £0.9m
(£900,000)
Patent Profits - £4,430,000
Patent Box Tax Deduction
In 2017, the Patent Box Tax
Deduction will be half of
the Patent Profits
(£2,215,000)
Reduced Taxable Profit
Calculate from Taxable
Profit – Patent Box Tax
Deduction
£4,785,000
Tax Payable
20% CT on Reduced
Taxable Profit
£957,000
Tax Saved (£7m x 20%) - £957,000 £443,000
11
This example highlights how AnyCo Ltd
would benefit from the Patent Box in 2017:
- The UK consumer electronics company
has an annual worldwide turnover of
£50m.
- AnyCo has a range of products protected
by qualifying patents and which account
for 65% of income.
- The remaining 35% comes from
maintenance services provided to
customers.
- Taxable profit is £7m.
- Routine costs amount to £8m and are
proportionally distributed between IP and
non-IP income.
- The company is already claiming £2m in
R&D Tax Credits.

WHAT DO I NEED TO DO?
12
• Identify potential
gaps & develop
strategy for products
without patents (ie.
filing, acquisition)
• Identify non-core
patents with no
product relevance
which could be sold
to cover other
companies' products
• Build evidence of
relevance to
product revenue
• Review product
pipeline and patent
coverage
• Identify patents &
licenses to consider
(based on filing date &
geography)
• Portfolio
Categorisation: to
identify patents used
in products & their
stage of development
• Internal Patent
Landscape: to map
patents to product
areas
Patent Box
Strategy
Patent
Relevance
Mapping
IP Audit
The Patent Box offers a very significant opportunity to reduce Corporation Tax but
will require planning, preparation and cross-departmental project work.

 Better strategic management of IP
– IP Audit
– Implementing on-going IP management process.
 Reduced IP Management Costs
– Patents may be identified which are not aligned to
business and don’t provide defensive or Patent Box
benefits
 Monetize or abandon
WHAT OTHER BENEFITS ARE THERE?
13

HOW CAN CLEARVIEWIP HELP?
14
Uniquely placed to project manage a Patent Box initiative
across company & alongside tax advisors
Significant experience in patent landscaping & patent-to-
product mapping
Frequently work with companies to acquire or divest patents
Optimise your R&D programmes & IP Filing Strategy to take
full advantage of the Patent Box

 Founded in 2007
 Intellectual Property Consultancy providing comprehensive range of services to high-tech
markets
 Proven international commercial experience
 Help clients develop IP strategy, establish effective processes & realise value from their
intellectual property
 Unique blend of commercial and IP experience
 Highly competitive track record of delivering value to businesses
 Experience of working with FTSE and Fortune 500 companies, as well as smaller enterprises
 Support a range of industry sectors including, but not exclusive to: telecoms, computing, silicon,
medical devices, satellite, consumer electronics, automotive and manufacturing
 Bespoke services inclusive of, but no limited to: investment due diligence, IP strategy,
competitive intelligence, IP discovery and capture, patent landscaping, patent searching, IP
acquisition, commercialisation and coaching.
ABOUT CLEARVIEWIP
15

DISCLAIMER
This document is for marketing purposes only. The information contained in this document should not be considered as legal or tax
advice. ClearViewIP is an IP Management Consultancy and not a law firm or tax advisory consultancy.
For a free, confidential discussion on how ClearViewIP can help your company, or to
find out more information about The Patent Box, please contact:
Benoit Geurts – Senior Consultant
(: +44 (0) 845 690 1953
*: benoit_geurts@clearviewip.com
www.clearviewip.com

Patent Box

Recomendados

Recomendados

Mais conteúdo relacionado

Destaque

Destaque (7)

Semelhante a Patent Box

Semelhante a Patent Box (20)

Mais de ClearViewIP Ltd

Mais de ClearViewIP Ltd (11)

Último

Último (20)

Patent Box