Demystifying the world of intellectual property

Sharon Veness, accountant partnerships manager at R&D tax credit and intellectual property (IP) specialist GovGrant, highlights the benefits of the underused UK Patent Box scheme


ccountants are in the perfect position to build awareness of IP opportunities with their clients, helping businesses to identify and capitalise upon their IP assets.

In the UK, R&D is a good indicator of a company’s potential for a Patent Box claim – it is a conversation that every R&D tax relief claimant should be having with their accountants.

Sharon Veness, accountant partnerships manager, GovGrant

Are UK clients claiming R&D tax relief but not Patent Box?

Your clients could well be innovating every day, and successfully claiming under the R&D tax relief scheme. Unfortunately, those same companies are not capturing and commercialising that innovation with an IP strategy or through a patent.

We like to imagine innovation as a continuum which starts with R&D, leads to IP creation and patents, finally culminating in a Patent Box claim.

There is a misconception that patents are all about protection and that they are only used for suing infringements, but organisations should also explore ways to commercialise the innovations they have created, which is where the expert advice of accountants can come in.

Why do so few SMEs patent their innovations?

There could be a few reasons why SMEs don’t turn their IP assets into patents:

  • Many think that the upfront costs are too high, with no certainty of success
    But if patents are considered with a commercial lens, then clients can acknowledge the potential benefit rather than just considering the cost. You should be asking your clients: “Have you got something worth patenting?”

  • The legal process to create a patent is considered complex and time consuming
    Getting a patent does not need to be difficult. With clear, realistic objectives at the start, the path does not need to be a tricky one.

  • There is generally a lack of awareness of the UK’s Patent Box scheme, particularly when compared to the R&D tax credit scheme
    Even if your client does not hold patents at the moment, this could still be an avenue they could explore. Typically, companies underestimate the innovation that they are involved in every day. For Patent Box, you only need a new and non-obvious solution to a technical problem, not a teleportation machine.

What is the Patent Box scheme?

There is often a misunderstanding of the mechanics and the scope of the Patent Box scheme, so what is it exactly?

Patent Box is administered by HMRC and is designed to benefit companies that keep their IP within the UK. This incentive rewards UK companies by reducing the corporation tax on profits resulting from qualifying IP income to 10%.

A full 100% of a company’s worldwide profits arising from qualifying IP income should qualify for the 10% Patent Box corporation tax relief. This is the case even if the patented element of the product or process is small. We use the metaphor of a blade of grass – you do not need to patent the whole field.

As corporation tax is due to increase, Patent Box claims could provide an even greater benefit to companies in the future.

How can accountants help clients with IP? Many accountants are now familiar with the process for claiming R&D tax relief, but rarely consider Patent Box. 

It could become part of their fact-finding process when examining assets, with accountants asking clients about potential IP if they see an inventive step. After all, with most UK businesses now being knowledge-based, there are firms out there with just as many intangible assets as tangible ones.

Patents should not just be the occupation of lawyers, as Patent Box sits squarely in the remit of accountants.

In conclusion

While it is an area that many businesses will not be familiar with, Patent Box is not as complex as it may seem at first.

Vitally, once accountants spell out the potential rewards of Patent Box claims – and dispel some of the myths surrounding them – they are sure to find many clients become more receptive.