For many innovative companies across Northern Ireland, maintaining tax efficiency is a common concern. Well known reliefs such as R&D tax relief have been subject to frequent updates in recent years in order to make the scheme more robust, while National Insurance Contributions (NICs) and other supply chain costs continue to rise.
One highly valuable relief remains significantly overlooked, and that is Patent Box.
First introduced in 2013, Patent Box was designed to encourage innovative UK companies to commercialise patented products by applying a reduced 10% corporation tax to qualifying outputs. Unlike R&D tax relief, which rewards investment in innovation, Patent Box rewards successful outcomes, including products and processes that make it to market.
Despite this, engagement with Patent Box remains low, particularly among SMEs. Data from HMRC shows that the majority of Patent Box claims are made by larger organisations, with only a fraction coming from smaller enterprises. In Northern Ireland, uptake is particularly limited, despite the fact that thousands of companies could potentially meet the qualifying criteria.
Why is Patent Box underutilised?
In our experience, it often comes down to the following key factors:
· The perceived complexity of patents
· Concerns over disclosing intellectual property
· Upfront costs associated with securing patent protection
· And simply, a lack of awareness
Many businesses also assume that patents are only relevant to tech sectors, when in reality, patentable innovation exists across the manufacturing, engineering and life sciences industries to name but a few.
Why is Patent Box Beneficial for Businesses?
The current tax environment makes Patent Box more relevant than ever for businesses. With corporation tax currently at 25%, the ability to tax qualifying products at just 10% makes Patent Box even more attractive.
The real opportunity lies in strategic intellectual property planning. When intellectual property considerations are embedded into R&D decision making early, businesses can position themselves to benefit from both R&D and Patent Box, rather than viewing them as separate are mutually exclusive incentives.
At Sumer NI, our Innovation Tax Relief team works closely alongside innovative companies to identify qualifying intellectual property, structure claims correctly and ensure compliance with evolving legislation. Our team of engineers with extensive industry experience are ready to assist you with your claim.
Visit: www.sumerni.co.uk to find out more.
