Patent Box Taxation – Claim Process with Patents

For clients who already have a patent or patents (granted) the Patent Box Taxation claim process comprises:

  • A Technical Review of the patent/products /services to determine which patents cover which products/services.
  • A Financial Review of the R&D costs in undertaking the development of the patented products/services.
  • A Financial Tax Calculation to determine the appropriate apportionment of profits from the sale of products/services covered by the patents.

We will need to have a technical and commercial discussion with you to understand your products, the processes by which they are made (in the case of patents covering a manufacturing process) and the commercial terms on which they are sold and licensed in order to:

  • Optimise the timing of Election into the Patent Box scheme
  • Prepare the first Patent Box claim
  • Advice on optimising future commercial arrangements to legitimately maximise the value of future claims.

Typical examples of areas that we would review and discuss during a Patent Box claim process include:

Treatment of patented processes

Where the products which are not themselves patented but which are made by a patented process (so called Notional Royalty claims

Analysis of the timing of Research and Development costs

the timing of R&D expenditure relative to when profits are derived from the products/services resulting from the R&D can have a significant effect on the claim calculation and in some cases depending upon the timing and amounts of R&D expenditure and resulting profits it can be better to delay electing into the Patent Box scheme

Analysis of the relative costs of Research and Development expenditure

So called modified Lexus-nexus approach – the level of R&D expenditure (especially if the R&D was undertaken by multiple parties) can have a significant effect on the tax saving for claims made after July 2016.

Analysis of the Qualifying Product(s) and Services

Commercial and Licensing Terms (where income results from licensing patented technology there needs to be a review of the license agreements to ensure the licenses meet the requirements of the Patent Box scheme

Analysis of the Products which are sold as part of a 'System'

where a patented product/service is sold as part of a ‘system’ or bundled together with many goods/services – some of which may be patented whilst some are not – an analysis of the total product offering and commercial arrangements will need to be undertaken to determine the optimum level of tax saving which can be achieved, whilst still complying with the complexities of the legislation.

Pending patent applications

appropriate tax treatment for pending applications – including where appropriate advising on a patent prosecution strategy designed to optimise cash flow receivables whilst still maximising IP protection