The Patent Box scheme, under which a company can apply a lower rate of corporation tax to profits earned from its patented inventions, came into effect on 1 April 2013. The Patent Box is an opt-in scheme for obtaining a reduced rate of corporation tax on certain IP-derived profits in the UK. The reduced rate (of 10%) will be phased in from 1 April 2013 and applies to a proportion of profits obtained from using patent rights, or from the sale of products incorporating a patented invention or made by a patented process. Generally a company can qualify for the Patent Box if it owns or takes a licence for a UK or EP patent, provided that the company made a significant contribution to the creation or development of a product covered by the patent.
The Patent Box is however not the only vehicle by which the government provides financial support for innovation. Here we outline just some of the available schemes.
Tax reduction schemes
Research and development (R&D) relief is a corporation tax relief that may be claimed for qualifying R&D costs. A qualifying R&D project is defined as one that seeks to achieve an advance in overall knowledge or capability in a field of science or technology through the resolution of scientific or technological uncertainty. Two tiers of relief are available: A small and medium-sized enterprise (SME) scheme has a more generous rate (225% from 1 April 2012) and is available for organisations with fewer than 500 employees and either an annual turnover not exceeding €100 million or a balance sheet not exceeding €86 million. A large company scheme is available for organisations which do not meet the SME criteria and provides tax relief on allowable R&D costs at 130%. Qualifying R&D costs include staffing, materials, utilities, and software. D Young & Co has links with specialist accountants who have extensive experience of preparing claims for these schemes and agreeing their detail with HM Revenue & Customs (HMRC).
The Technology Strategy Board
The Technology Strategy Board is an executive non-departmental public body which is sponsored by the Department for Business, Innovation and Skills (BIS).
Various programmes and tools to support innovation are offered, of which a selection are set out below:
The Smart Scheme
This scheme offers funding to SMEs to engage in R&D projects at key stages of development. Offering a fast (30 day) decision turnaround, it is a competitive scheme which is always open to applications. For more information on the various types of grants available, visit:
The SBRI (Small Business Research Initiative) programme
The SBRI programme seeks to bring innovative solutions to specific public sector needs, by engaging a broad range of companies in competitions for ideas that result in development contracts. Since April 2009, over 110 such competitions have been held, with over 1000 contracts awarded and funding of over £90M distributed. Particular advantages of this programme are that the contracts can be 100% funded, resulting intellectual property remains with the company and there is the possibility of long term contracts.
Collaborative research and development
These are competitions organised within specific technology themes, with the particular aim of supporting collaboration between businesses, and between businesses and academia. The competitions are open to businesses of any size including Start-ups and Micros. Grants of £25k to £1M are available. The programmes can run from a few weeks up to 2 or3 years. The intervention rate varies, but is typically 50% - 60%.
Innovation vouchers are provided to enable businesses to access specialist knowledge for all types of innovation, for example: ideas for new or improved products, processes and services; using design to improve ideas; and managing intellectual property. The vouchers are available to start-up, micro or small and medium-sized business located in the UK for whom it is the first time working with the selected knowledge supplier. The idea for which the specialist knowledge is sought must be applicable to one of the thematic areas for which applications are currently invited. The vouchers can have a value of up to £5k.