It really is supposed to assist turn Britain in to Europe’s technology middle, however the new tax alleviation on profits produced from patents scheme — known as the Patent Box — may have no effect on most innovative little companies in the Oughout. K. with regards to starts in may, entrepreneurs thought.
That’s for two reasons said Greg Marsh, CEO and co-founder of London-based startup OneFineStay.
“One, because most small innovative companies will be putting their revenues back into growth so they’re not making a profit. Two, because in this sector of tech, very few businesses will hold patents.”
Mr. Marsh’s company, OneFineStay, is a relatively unusual hybrid: part software platform hosting the company’s room hiring service, part hardware — they also sell a remote-controlled electric door lock called the Sherlock that ties into the software platform. Mr. Marsh has patented the hardware, but not the software part of his business.
“Most of our creation as a business would be software or services, [that is] innovation which doesn’t qualify for patent protection,” he says. But they chose to patent the lock: “Fundamentally, we felt like it was an innovative invention capable of getting a patent.”
Mr. Marsh touches on the old problem of software patents: “I used to work on the other side of the fence at Index Ventures. And it is almost impossible to defend software or business process innovation patents in the U.K.”
Jon Bradford, of U.K.-based accelerator Springboard, has a similar story — tax cuts on patents won’t help the startups he knows any time soon.
“For the vast majority of the teams that I am working with it is not relevant. The cost and time to acquire a patent is prohibitive and there are limitations around being able to acquire software patents in the U.K.”
Introduced in the April 2012 Budget, Patent Box legislation was part of a raft of measures aimed to “turn Britain into Europe’s technology centre” as Chancellor George Osborne put it in his 2012 Budget speech.
The tax break will help large companies with strong Intellectual Property holdings such as pharmaceutical companies, and it was representatives from GlaxoSmithKline GSK.LN +0.55%, Rolls-Royce and large manufacturing firm Dyson who were part of the Treasury’s working group in the consultation on the topic.
From the 1st April 2013, any profits that can be attributed to patents, or to a patent that a company holds an exclusive U.K. license for, are subject to only 10% tax. That’s a significant cut from the current corporation tax rate of 23% and the 2015 rate of 21%.
The tax cuts for patents will be phased in over the next four years, with 60% of the cut applicable from now, and the full tax cut available in 2017.
The U.K. Intellectual Property Office (IPO) told us that there had been a modest increase in the number of patents filed by U.K. companies since the announcement of Patent Box, a 4 % rise compared to 2011. Finalized end-of-year figures are not released by the IPO till April, but it is understood that 15,343 patents were filed by U.K. companies in 2011, according to figures gained from a Freedom of Information request and published in the New Law Journal. This means that approximately 16,420 U.K. patents were filed by U.K. companies in 2012.
The IPO was ambivalent about attributing rises or falls to any single cause. “Changes in demand may arise from a range of factors, such as the financial environment, innovative activity in particular technologies, and responses to initiatives such as the introduction of the Patent Box.”
But while the nation’s innovators aren’t flooding to file more patents, some U.K. startups will benefit from Patent Box. Cambridge-based biotech firm, Cambridge Temperature Concepts is one. The company makes devices that monitor fertility rates, and they have patented their core technology.
CEO Shamus Husheer said: “Pretty much 100% of our revenues are from our product which we’ve got a patent for. It appears to be black and white for us, and we haven’t needed to talk to any lawyers, just our accountant. We were going to get patents anyway, we’re not adjusting our company in any way, so this is a gift for us, if you like.”
But, like many other early-stage high-growth companies, they’re not actually going to see any cash anytime soon:
“But we’re not actually profitable, this is something that will be very attractive to us when we start making a profit, and not plowing revenues back into our operation. Which we’re currently trying to expand into America.”
Nevertheless when they do begin turning an income, it will likely be something. “The some other effect is it is a reason for all of us to stay in the actual U. Nited kingdom. It’s a method the U. Nited kingdom. government will help keep our own high value knowledge economic climate jobs. ”
