On 3 March 2021, the Chancellor Rishi Sunak announced the governments’ decision to increase the rate of corporation tax from 19% to 25 %. When the tax increase comes into effect in April 2023, businesses with profits of £50,000 or less will continue to pay the current rate of corporation tax of 19%. However, once earnings exceed £50,000 the rate of corporation tax will taper upwards to £250,000 where the full rate of 25% will then become payable. According to the Chancellor these changes are fair and necessary as the UK looks to recover from the coronavirus pandemic.

While the change in corporation tax will likely be a concern for many larger businesses, the good news is that no changes were made to the Patent Box scheme which allows companies to pay a reduced rate of corporation tax (10%) on income derived from qualifying patented inventions and other forms of qualifying intellectual property rights (to read more about what intellectual property qualifies for the Patent Box scheme click here). Therefore, companies who protect their innovations and are able to take advantage of the Patent Box scheme, make even greater savings and reduce their tax burden despite the increase.

Given that it can take several years to obtain a granted patent, it is important that companies review their intellectual property strategy and intellectual property now so that patent applications for inventions which are or could be valuable to the business can be filed in good time before the changes in corporation tax take effect.

Further information on the Patent Box scheme and how Wilson Gunn can assist in determining your eligibly can be found on our website here.