Small businesses face losing out on tax breaks

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Admin and claim costs put businesses off applying for these says KPMG

Small businesses and tech start ups could be missing out on tax breaks because they fear that the financial and administrative cost of claiming these will be too high.

That’s the latest from  KPMG, which has warned that as a result of these fears, companies may fail to claim a special, discounted tax rate of just 10 percent on profits arising from the exploitation of patented (or patentable) innovation.

These are available under the so-called “Patent Box” regime coming in from 1 April 2013.

Jonathan Bridges, associate partner at KPMG in the UK, and lead adviser on Patent Box claims, said: “The Patent Box regime is an extremely attractive tax break for businesses with qualifying profits. For tech start-ups it is another compelling reason to seek patent protection for their innovations.

“Although the patent protection application process can be slow it is important to understand that the tax benefits will accrue from the patent application date and not only on sales revenues generated once the patent is granted.

“Many large businesses with significant intellectual property based profit streams are already closely examining the potential tax benefits it may bring them.  But we have noticed that many smaller businesses such as tech start-ups do not appear to have considered what savings are available to them from the Patent Box’s 10 percent tax rate.”

According to KPMG, many tech start-ups wrongly assume that it may not be economic for them to claim the tax breaks available under the Patent Box regime because they believe that the advisory costs they will incur and the administrative burden of filing a claim will outweigh the cash benefit.

However, KPMG claims this is not the case.

It’s launched its “Patent Box Express” service, which it claims will help advise smaller businesses on making Patent Box claims under a fixed pricing model.

Bridges added: “Small and medium sized businesses are sometimes concerned that the costs and hassle of claiming a tax relief might outweigh the financial benefits.  We’ve tried to make it simpler for them to access the very valuable statutory relief (the patent box regime) under the appropriate circumstances.

“Under Patent Box Express, a business with relevant intellectual property profits of £100k per year could be looking at a tax saving of around £6k to £12k.  If their relevant profits are £250k or more, annual savings are upwards of £30k – equivalent perhaps to an extra member of staff.”


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