• At Kemp Little, we are known for our ability to serve the very particular needs of a large but diverse technology client base. Our hands-on industry know-how makes us a good fit with many of the world's biggest technology and digital media businesses, yet means we are equally relevant to companies with a technology bias, in sectors such as professional services, financial services, retail, travel and healthcare.
  • Kemp Little specialises in the technology and digital media sectors and provides a range of legal services that are crucial to fast-moving, innovative businesses.Our blend of sector awareness, technical excellence and responsiveness, means we are regularly ranked as a leading firm by directories such as Legal 500, Chambers and PLC Which Lawyer. Our practice areas cover a wide range of legal issues and advice.
  • Our Commercial Technology team has established itself as one of the strongest in the UK. We are ranked in Legal 500, Chambers & Partners and PLC Which Lawyer, with four of our partners recommended.
  • Our team provides practical and commercial advice founded on years of experience and technical know-how to technology and digital media companies that need to be alert to the rules and regulations of competition law.
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  • At Kemp Little, we advise clients in diverse sectors where technology is fundamental to the ongoing success of their businesses.They include companies that provide technology as a service and businesses where the use of technology is key to their business model, enabling them to bring their product or service to market.
  • We bring our commercial understanding of digital business models, our legal expertise and our reputation for delivering high quality, cost-effective services to this dynamic sector.
  • Acting for market leaders and market changers within the media industry, we combine in-depth knowledge of the structural technology that underpins content delivery and the impact of digitisation on the rights of producers and consumers.
  • We understand the risks facing this sector and work with our clients to conquer those challenges. Testimony to our success is the continued growth in our team of professionals and the clients we serve.
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  • For clients operating in the online sector, our teams are structured to meet their commercial, financing, M&A, competition and regulatory, employment and intellectual property legal needs.
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  • The mobile and telecoms sector is fast changing and hugely dependent on technology advances. We help mobile and wireless and fixed telecoms clients to tackle the legal challenges that this evolving sector presents.
  • Whether ERP, Linux or Windows; software or infrastructure as a service in the cloud, in a virtualised environment, or as a mobile or service-oriented architecture, we have the experience to resolve legal issues across the spectrum of commercial computer platforms.
  • Our clients trust us to apply our solutions and know-how to help them make the best use of technology in structuring deals, mitigating key risks to their businesses and in achieving their commercial objectives.
  • We have extensive experience of advising customers and suppliers in the retail sector on technology development, licensing and supply projects, and in advising on all aspects of procurement and online operations.
  • Our legal professionals work alongside social media providers and users in relation to the commercial, privacy, data, advertising, intellectual property, employment and corporate issues that arise in this dynamic sector.
  • Our years of working alongside diverse software clients have given us an in-depth understanding of the dynamics of the software marketplace, market practice and alternative negotiating strategies.
  • Working with direct providers of travel services, including aggregators, facilitators and suppliers of transport and technology, our team has developed a unique specialist knowledge of the sector
  • Your life as an entrepreneur is full of daily challenges as you seek to grow your business. One of the key strengths of our firm is that we understand these challenges.
  • Kemp Little is trusted by some of the world’s leading luxury brands and some of the most innovative e-commerce retailers changing the face of the industry.
  • HR Bytes is an exclusive, comprehensive, online service that will provide you with a wide range of practical, insightful and current employment law information. HR Bytes members get priority booking for events, key insight and a range of employment materials for free.
  • FlightDeck is our portal designed especially with start-up and emerging technology businesses in mind to help you get your business up and running in the right way. We provide a free pack of all the things no-one tells you and things they don’t give away to get you started.

Money in the box - what's in the UK patent box for you?

Background

The UK Patent Box regime was introduced in April 2013 to encourage innovation in the UK and with the hope of creating more UK jobs.

Previously, businesses viewed patents as a means of protecting rights they owned, but now the introduction of the Patent Box means that patents should be viewed separately from a fiscal perspective, as patents can now make a significant contribution to the profitability of the business. For example, there may now be a benefit in filing or pursuing extremely narrow patents, or patents of more questionable validity, where the usual course might have been to drop them. In particular, if investment has already been made in filing such patents, Patent Box relief may provide a means of effectively clawing back some of the investment, notwithstanding that the level of profits attributable to the patented invention may be relatively low. To benefit from Patent Box relief, patents need only be maintained in relation to a single jurisdiction so patents in other jurisdictions can be dropped, if they are otherwise of marginal or little benefit, meaning that renewal fees may be sufficiently reduced such that the Patent Box  relief outweighs cost of maintaining the patents.

The role of patents has changed because the incentive provided by the Patent Box regime is a reduction in the rate of tax on qualifying profits from more than 20% to 10%. This can give rise to a significant annual saving – for example, on profits of £1 million the tax saving could be £100,000 annually. But for a UK patent, by way of example, the renewal fees are less than £600 per year (they range from £70 for year 1, £170 by year 10, £350 by year 15, £600 by year 20), so if profits are more than £6,000 for a product, the actual cost is at least break-even with the basic renewal costs. Clearly, other costs such as accounting have to be factored in (and costs of final aspects of prosecution where it would otherwise have been abandoned or withdrawn), but even for products with a falling profit trajectory, or relatively low margins, Patent Box relief is worth having in mind. This makes the UK an attractive jurisdiction, especially as the Patent Box benefit is in addition to the enhanced relief which is currently available for certain research and development activities.

Who can benefit from the Patent Box?

A company can benefit from the Patent Box if it is subject to UK tax and satisfies the following criteria:

  1. it holds a qualifying patent interest;
     
  2. it makes a significant contribution to the development of the qualifying patent or any product incorporating the patented invention (either itself or another group company); and
     
  3. it performs significant management activity in connection with the development or exploitation of the patented innovation or the product which uses it.
     

What is the benefit?

The benefit is a reduction in the tax rate to 10%, although phased in between now and 2017. This gives rise to a saving of half of the normal tax rate, which should benefit both cash flow and potentially also the valuation of the business (where the valuation is based on future profitability).

This reduced rate of tax applies widely – regardless of whether income is received directly from licensing patents, the sale of patented products or used in internal process or to provide services.

One particularly attractive feature is that even if the patented element of a product is minor, 100% of the income arising from the product falls within the patent box regime. To take a simple example, if the steering wheel of a car is patented then the whole sale price of the car can benefit from the Patent Box.

Which Patents will Qualify?

The Patent Box will apply primarily to patents granted by the UK Intellectual Property Office, the European Patent Office and patent offices in a number of specified EEA countries. It will be available to both the legal owner of a patent and also to companies which hold exclusive rights to exploit the patent.

There may be some scope for expanding the income that can benefit from the Patent Box, with some lateral thinking about the types of intellectual property that may be capable of being patented in the various EEA countries. For example, it is extremely difficult to patent software in the UK, whereas it is much simpler in certain other EEA countries. This may provide an opportunity to benefit from the patent box regime by patenting software in an EEA country and then claiming the 10% tax rate in respect of the products etc which incorporate this software.

What do I need to do to benefit?

Whilst the discussion above might suggest that benefitting from the 10% rate of tax under the patent box regime is relatively simple, there are a number of aspects that may involve some work. 

Having said this, the potential rewards can be significant, and we would recommend reviewing your current patent portfolio and considering if further patents can be obtained, understanding how patented innovations are used within your business and then establishing whether the patent box criteria are satisfied. Once this is done, the estimated tax savings can be identified, and recommendations can be made to maximise the tax savings.

Kemp Little is ideally placed to assist you with the Patent Box, as we combine both tax and intellectual property expertise within a single firm.

For further information, please contact Michael Cashman, Tax Partner or Rebecca Halford-Harrison, Intellectual Property Partner.