UK patent box

Tax Matters: R&D tax credits; Patent Box plus SEIS / EIS course

Here’s a round up of some recent financial & tax news that might be of interest – you can find an audio download version of this post below:

Calls for quarterly R&D tax relief for SMEs
In an effort to boost SME cashflow, there are calls for the Government to make the UK R&D tax incentive a quarterly rather than end of year tax relief. Currently SME companies claim R&D tax relief retrospectively. Large companies can, however, reduce (in year) quarterly instalment tax payments that they are required to make thereby securing the benefit of the relief earlier. This measure would help level the playing field. This makes sense – we’ll have to wait and see…

March Budget 2016 – Pension countdown
George ‘O’ will step up on 16 March 2016 to deliver his Budget Statement and the big news is expected to be regarding restrictions on income tax relief on pensions for higher rate tax-payers.

Action point: Consider making pension contributions in advance of the Budget date.

Patent Box changes afoot – act now
New, more stringent rules will apply to companies that elect into the Patent Box tax incentive after 30 June 2016. This follows the ‘beating’ this UK Gov tax incentive received from other EU states following its introduction in 2013 (but for how much longer in the light of a possible Brexit….?).

Action point: If you have a patent or patent pending, consider electing in before 30 June 2016.

Get ready for new dividend tax rates
From 6 April 2016, new dividend tax rates will apply that results in an almost complete shake-up of the fairly established remuneration structures for most owner-managed companies.

Action points: Run some calculations to see how you might be affected and consider paying further dividends in advance of the 5 April 2016 deadline. Note that companies that qualify for R&D tax relief might have some of the down-side offset by receiving a greater proportion of the remuneration in the form of PAYE salary / bonus and claiming enhanced R&D tax relief (dividends are not eligible).

Buy-to-let changes – traps for the unwary
I probably don’t need to tell you more about the widely publicised restrictions being placed on buy-to-let interest relief etc but watch out for the Stamp Duty Land Tax (SDLT) 3% surcharge that can bite in what might otherwise be fairly innocuous circumstances…

For example, buy a new residential house before selling old residential house = 3% ouch! You might be able to receive a refund in these circumstances but the initial additional SDLT outlay can be significant and is yet another case of a tax sledge-hammer to crack a nut!

SEIS / EIS Course Launch
By popular demand, we have set up a new course setting out in the ins-and-outs of the hugely popular (yet often misunderstood!) Seed Enterprise Investment Scheme (SEIS) and Enterprise Investment Scheme (EIS).

These UK Government tax incentives are growing in popularity – especially with the growth of crowd-funding platforms such as Crowdcube. We have helped and continue to help 100’s of companies navigate and make the most of these tax reliefs which can be quite tricky to navigate for the uninitiated.

If you are a company founder or considering diversifying into business angel investing yourself, you should benefit from this course.

You can sign up to receive the course via email here:

10 need to know facts about the UK Patent Box

Patents are only for the old machine

You may already be successfully claiming R&D tax credits for your fast growth company. If so, you might be wondering what’s next in terms of tax incentives to assist your business once you have gone beyond the research and development phase and into the phase of commercial exploitation?

Up until now, there hasn’t been much….

However, we now have the latest UK tax incentive for intellectual property rich companies – the Patent Box, which kicks in from 1 April 2013.

The UK Patent Box is a £1bn+ tax incentive that represents potentially one of the most significant tax incentives ever introduced in the UK.

Here are 10 facts to get you started – plenty more detail to come in future posts:

  1. 10% corporation tax rate will apply to company income falling within the Patent Box – this more than slashes the corporation tax rate in half!
  2. Applies to qualifying patent derived profits generated from 1 April 2013 – 10% tax rate phased in over four years
  3. Companies must satisfy specific ownership requirements to one or more patents to fall within this regime
  4. Patents must be granted for the relief to apply. For patents pending, you can track the relevant income for six years and claim the tax relief upon grant
  5. Patent must be granted by certain designated patent offices to qualify: the UK Intellectual Property Office; the European Patent Office or other patent offices within certain designated EU countries
  6. Companies must take an active role in developing the invention to which the patent applies to qualify – passive ownership will not suffice.
  7. For groups, the company that holds the patent must carry out an active role to manage the IP
  8. Relevant patent profits are calculated by applying either an apportionment or streaming methodology – apportionment is the default calculation methodology
  9. Disappointingly the calculations are complex as you must run through a six stage process to reach the qualifying relevant patent profits –  but this is where we can help.
  10. You enter the patent box regime by election – it is not automatic.

Given that this relief kicks in from 1 April 2013, your company may already fall within this regime if your financial year end falls after this date e.g. those with an April, May or June  year end!

If you already have patents or are considering filing patents, you need to start planning now to maximise this opportunity. 

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