Member Article

Budget 2021: Corporation tax increase makes filing patents more attractive than ever

Bringing the first corporation tax increase since 1974, the Chancellor’s Budget Statement was disappointing news for many businesses, even though the need to address the deficit caused by the pandemic is well understood. On the up side however, it has had the accidental effect of enhancing the appeal of the Patent Box regime.

With the corporation tax increase not coming into play until 2023, innovative businesses have time to submit patent applications for their technologies, as long as they act fast.

Michael Jaeger, partner and patent attorney at European intellectual property firm, Withers & Rogers, said:

“In his 2021 Budget the Chancellor of the Exchequer, Rishi Sunak, announced that corporation tax will increase to 25% for larger companies in 2023.  The rate will remain at 19% for those businesses making profits of less than £50,000 and rise in a tapered manner as profits increase to £250,000, at which point the full 25% rate will apply. This change is being made to raise additional revenue for the UK Government, to fund the deficit resulting from measures it has taken during the Covid-19 pandemic.

“While this rate will remain the lowest for the G7 countries, it will be cause for concern for many businesses. However, help is at hand for innovative businesses that have patents in place covering their products and services. This is because the UK Government’s Patent Box tax relief scheme allows companies to pay a nominal 10% rate of corporation tax on profits generated from patented technologies. We expect this to become even more attractive to innovative UK companies now that the differential between the Patent Box rate and the top rate of Corporation Tax is due to widen.  

“Innovation-led businesses should set aside time to assess their intellectual property strategy, to determine if they can maximise the effect of their patent filings and mitigate any increases in their corporation tax liability.  Since it can take some time for qualifying patents to be granted, companies should act now to begin the process of filing patent applications and maximise the return on their R&D investment.”

This was posted in Bdaily's Members' News section by Withers & Rogers .