Our services are centred around intellectual property that can be registered. We protect innovation, design, and branding across all sectors of industry, and at all stages in the supply chain.

For each IP right we offer services covering strategic advice, pre-registration searches, registrations and renewals, oppositions and dispute resolution. We handle work throughout the world, working with local colleagues in over 100 countries.


Our attorneys specialise in one or more sectors of industry, which enables them to provide quality advice with a commercial focus.

Our patent specialists have detailed understanding of the background technology, which ensures that your patent applications are prepared with the correct scope, reducing the likelihood of challenges from third parties and objections from the patent office.

They also advise whether other forms of protection would be more appropriate. Our brand specialists work with brand managers for leading brands and their advice is commercially focussed making sure that you get the best value from your budget.

UK Patent Box – part of your business strategy?


As we have reported previously, the UK Patent Box as we knew it closed on 30th June. We are currently awaiting the Finance (No. 2) Bill 2016 to pass through Parliament which introduces the new regulations; it is currently due to enter the report stage in the House of Commons on 5th September, and so still has a way to go. We will keep you posted as and when we see any developments.

While we are waiting, how about a look at the Patent Box past, present, and future?


The current UK Patent Box has now been in effect for just over three years, and although we are yet to see the 2015/2016 financial results. HMRC has released some numbers for the benefit claimed thus far. Approximately 639 companies have received around £335 million of relief. On average, that is a little over £500k in benefit per company (the average here is the mean, we do not have the statistics to calculate the median, and so there is no way of knowing whether that average is being skewed by a few large companies receiving significant amounts of relief). Nevertheless, these are not insignificant numbers and will easily cover both the accounting costs and the costs of obtaining the patent. Indeed, for most companies this level of relief would likely cover a worldwide patent filing programme.

When introducing the Patent Box, HMRC estimated that by 2019 the steady state annual tax cost to the UK Government would be around £1.1bn. It would appear that there needs to be significant uptake in the next two or three years for that estimate to be accurate. Could the apparent lack of uptake be down to administrative costs being higher than expected? Anecdotal evidence suggests that unless your profit margin on the patented product is greater than 10%, the benefits do not outweigh the costs.


As we mention above, the new Patent Box has yet to enter into law, and so we are currently in no-man’s land.  Nevertheless, we understand from HMRC that it is likely the grandfathering provisions will mean that “IP not covered by the new Patent Box rules will continue to receive the benefit of the existing Patent Box for a period of 5 years, which is until 30 June 2021, except that some IP acquired on or after 2 January 2016 may only receive the benefit of the existing Patent Box until 31 December 2016”.


Many of the aspects of the new Patent Box will be familiar to those who used the old Patent Box. The qualifying criteria remain the same, the calculation of IP profits based on the three-step method remains the same. However, the new Patent Box rules will no longer allow the ‘standard method’ of calculation.

Perhaps the biggest change for most will be the necessity to stream for every individual IP right, patented product or product family. This means that an SME with three patented products may need to prepare three streaming calculations in which income and expenditure are allocated to each sub-stream. This will almost certainly add to the administrative burden, even if it does not reduce the benefit.

As we mentioned above, anecdotal evidence suggests that unless your profit margin on the patented product is greater than 10%, the Patent Box benefits do not outweigh the costs. It appears likely that the profit margin needed to make the new Patent Box work for an SME will be even higher.

For each separate sub-stream, the nexus ratio must be prepared. We have reported on this before, but in essence the nexus ratio reduces the benefits available where the company has not developed the IP in-house, or has acquired IP. Basically, in-house and unconnected sub-contracted R&D is good, whereas connected subcontracted expenditure (even if to a fellow UK group company) and acquisition of IP costs is considered bad.

Clearly, ensuring that your administrative systems can deal with the increased level of tracking and tracing required will be important if you wish to make use of the new Patent Box. Those systems will need to be able to track R&D expenditure to patents, products or product families and allocate income and expenditure to sub-streams.

Even though the new Patent Box is likely to be more onerous for companies, given the potentially significant relief available there may still be savings to be had.

If you are interested in learning more about the Patent Box or the changes proposed by the consultation, please contact us.

This article is for general information only. Its content is not a statement of the law on any subject and does not constitute advice. Please contact Reddie & Grose LLP for advice before taking any action in reliance on it.

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