PATENTS: ARE THEY REALLY WORTH THE EFFORT?

Patents can deliver IP protection, pander to your vanity, and increase buyer confidence, but what about generating extra profit?

Often smaller businesses will cite the patent application process as being cost prohibitive and distracting to the business.  Furthermore, they offer no real-world protection if the business cannot afford to defend their IP in the courts should the need arise.  It’s a fair argument, patents as a means of IP protection only represent the first, and least costly step, often you are better advised to just get on with capitalising on the head start that you have given yourself.

However, a patent is not just about protecting the results of your hard work.  They can be a very effective means of demonstrating the leading-edge nature of the work that you do and will help to set you apart from your competition.  They are also a badge of honour for any ambitious business owner, offering independent confirmation that you are delivering world firsts.

This is all fairly obvious stuff, but it is not commonly known that patents can also deliver clear cut extra profit for your business.  The Patent Box regime is one of many government led initiatives to encourage investment in innovation, thereby stimulating growth in the economy.  Unfortunately they are not particularly well publicised, and can be an accounting nightmare for the uninitiated.  Hence your accountant has probably not highlighted them to you.

To access Patent Box you simply need the most basic of UK patents, and this will give you significant Corporation Tax relief on profits from all global sales that were reliant on that patent.  On a basic level this means that if you patent a new thingybob that forms a small but crucial part of a wotchamacallit, all profits from sales of that wotchamacallit attract the reduced Corporation Tax rate.

However, you do need to demonstrate that those sales were reliant on your innovative design, so you might want to apply some realism and say that you’d have sold 20% of the wotchamacallits even if they had the old thingybob design.  This is where it really pays to employ experts in the field, they will ensure that your claims are realistic, clearly documented and evidenced, and ultimately, defendable.

It is also worth getting the experts involved at the point that you are thinking of applying for the patent.  The scope of the patent will likely differ to one filed for the purpose of IP protection…which is what most patent attorneys are used to working on. They can also advise you on the optimum timing to elect to enter the Patent Box regime to avoid early loss-making years offsetting profitable later years.

So, if you want to increase your post tax profits, without any significant investment of time or money, you really ought to get in touch with us, you will continue to reap the rewards for years to come.  If you already hold the patent it’s even possible to retrospectively apply for Patent Box relief.

Why wouldn’t you do it?

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