In the news recently, we have been told that the UK is now out of recession. It sounds like good news, and of course it will be once the economy starts to settle down and, hopefully, grow. But investment in innovation still seems to be sluggish, and one wonders if potential investors and funding bodies alike are sitting tight and waiting to see what the economy will do. The link between funding and intellectual property rights is often underestimated. So we thought we’d share some often-overlooked benefits of having registered intellectual property (IP) rights, especially patent applications and patents, when it comes to securing funding, whether it be by investment or some form of government funding or initiative.
R&D Tax Credits
Research and Development (R&D) tax credits are a government inventive designed to reward companies for investing in innovation. In reality, they can be a valuable source of cash for businesses to invest in accelerating their R&D, hiring new staff and ultimately growing. Limited companies that spend money developing new products, processes or services, or enhancing existing ones, are eligible to make an R&D tax credit claim to receive either a cash payment or a reduction in their Corporation Tax.
To benefit from R&D tax credits, you must:
- be a limited company
- have carried our qualifying research and development activities, and
- have spent money on these activities.
Whilst the scope for claiming R&D tax credits is huge, and exists in every sector, the conditions for meeting the requirement for qualifying R&D activities have been tightened up in recent years; and, whilst not always absolutely definitive, if a patent application has arisen as a result of your R&D activities, it can help to add weight to your claim.
For more information on R&D tax credits, see: Research and Development (R&D) tax relief – GOV.UK (www.gov.uk)
Grant Funding
Applying for grant funding can be a daunting and difficult prospect, especially in the innovation sector. It is often a good idea to use a professional bid writing service to give you the best chance of success in a highly competitive arena and, even then, your bid will need to meet very stringent conditions. Again, whilst not definitive, if you have a patentability search performed and can demonstrate that one or more patent applications could reasonably result from your innovation, then it could help to tip the balance.
Patent Box
If you have a patent for a product or process (or any part of it), then the government’s Patent Box scheme can allow you to claim a 10% reduction in Corporation Tax on profits from commercially exploiting that product or process. Therefore, whenever your company develops a new or improved product or process, it is always worth exploring whether or not you could file a patent application to take advantage of the Patent Box scheme. For more information on the Patent Box scheme, see: Use the Patent Box to reduce your Corporation Tax on profits – GOV.UK (www.gov.uk)
Investment and SEIS
Last, but by no means least, let’s consider private investment and also a less well known government scheme called the Seed Enterprise Investment Scheme (SEIS).
Private Investment is a well-understood concept whereby an investor provides capital to a company in return for some form of reward (whether that be a preferential interest rate or, more frequently, a share of the business). SEIS is intended to incentivise investment in small and early stage startups by offering great tax efficient benefits to investors in those types of business. Either way, all investors will want to be sure that their investment is safe, and one of the questions they will often ask is ‘what is in place to stop competitors from doing the same thing and eating into your market?’ (we’ve all seen Dragon’s Den!). If you have registered IP in place, this can help to assuage their concerns and provide confidence that their investment is secure. More information on SEIS can be found here: Apply to use the Seed Enterprise Investment Scheme to raise money for your company – GOV.UK (www.gov.uk)
Note: if you want to file a patent application, you must do so before there is any non confidential disclosure of the innovation.
Need Help?
Strachan IP is a full service IP firm, with many years’ experience helping innovative SMEs to identify, capture, preserve and protect the valuable IP they create. If you have any questions at all about patents or IP more generally, please book a free initial consultation by emailing vicki.strachan@strachanip.co.uk, or visit our website at https://strachanip.co.uk/contact/, or use our Calendly link: https://calendly.com/strachan-ip-a-fresh-view-of-intellectual-property/30min.
