Developing battery technology? Think inside the Box!

The Patent Box is a tax break scheme that is designed to encourage companies, such as those developing and commercialising battery technology, to keep and exploit intellectual property in the UK.

If you have intellectual property that generates profits for your company, you may be entitled to pay a much lower rate of only 10% corporation tax in the UK. Indeed, since the main rate of corporation tax increased from 19% to 25% in April 2023, the incentives for thinking inside the (Patent) Box are now greater than ever.

Intellectual property (IP) refers to the creative ideas that underpin innovation. In the fields of energy storage and batteries, this could relate to inventions associated with electrodes, electrolytes, recyclable materials or improved charging, for example.

If those ideas are new and wouldn’t have been obvious, they can be protected by applying for a patent. And if you own or exclusively license a patent, then you could benefit from the Patent Box.

What IP do I need to benefit from the Patent Box?

The Patent Box applies to patents granted by the European Patent Office (EPO), or national patents in the UK, Austria, Bulgaria, Czech Republic, Denmark, Estonia, Finland, Germany, Hungary, Poland, Portugal, Romania, Slovakia or Sweden. You do not need a UK patent to benefit from the Patent Box.

The Patent Box is generously designed. The patent in question needs to cover a product that you sell, or a component which is incorporated in the product. There are also provisions for profits not coming directly from a patented product – for example, where the patented invention is a new method of manufacture. Other, less common types of IP can also provide eligibility for Patent Box.

What profits can I pay the lower tax rate on?

The exact calculations are complex and we recommend that you consult an accountant on this. However, key relevant activities include worldwide income from sales, licence fees and royalties.

You do not have to have a patent everywhere (or indeed anywhere) that you sell your product to benefit from the Patent Box.

Profits from items which incorporate your patented product may also be eligible. For example, if you have a patented anode material, profit from sales of a battery incorporating that anode material will count for the Patent Box.

What if my company doesn’t have any patents?

The Patent Box is available not only for patent owners but also those who hold an exclusive licence to a patent. So, even if you don’t have patents of your own, you may be eligible!

To take advantage of this scheme in the future, speak to us about your new ideas and products, and we will discuss with you whether patents might be available.

My company hasn’t made an invention for years – how can we benefit?

Although the Patent Box is intended to stimulate new R&D, if you already have patents which cover your products, you will be eligible for the Patent Box.

Additionally, many companies ignore potentially valuable new IP because they do not recognise when an “invention” has been made.

So, it may be useful to review the technologies and products with which you already work or your recent and ongoing product developments – there may be inventions which have not been recognised and which can be patented. We can help you put in place sensible “invention capture” procedures. Of course, normal requirements for patentability apply, so products which have been sold to the public are unlikely to be patentable.

For the future, keep the Patent Box in mind when developing new products or ideas. Contact us early – there may be several patentable inventions in a single product idea or development and the financial benefit could be considerable!

Patents are expensive – how I profit from having them?

Many companies have decided previously that patents are not worthwhile for their businesses. Maybe the costs seemed too high. Maybe the scope of protection available was not enough to stop competitors.

With the Patent Box and the increased main rate of corporation tax, there is a new consideration. A cost of several thousand pounds for a patent might seem high, but the saving on corporation tax is potentially far greater. A patent can last for up to 20 years, and a saving on corporation tax over the whole or part of that period could easily repay the original costs.

Of course, the traditional importance of patents remains. If you can protect your inventions and stop your competitors copying your ideas, an advantage in the busy energy storage marketplace can be gained, helping your company not only to survive, but thrive.

To qualify for the Patent Box, your patent only needs to cover your own product, even if it is only protected narrowly. So, a patent can be valuable not only for fending off competitors, but also to benefit from tax breaks.

How can Mewburn Ellis assist me?

At Mewburn Ellis, as a firm of patent attorneys, we have a long history of working with innovators in the energy storage space – from the components of individual cells, through to broader considerations relating to battery architecture, power supply and distribution, or delivery infrastructure projects.

Our battery tech team has a depth of experience and technical knowledge, having supported numerous companies, from start-ups to established multi-nationals. We have also published a special report on Battery insights & IP trends, in which we detail recent innovations, discuss key challenges for the future and examine data on European patent applications in the field.

With regard to Patent Box, Mewburn Ellis can provide a wide range of services including –

• Portfolio review: what IP do you have? Does it cover your products?
• IP auditing: are you generating patentable ideas? Do you have the infrastructure in place to take best advantage of them?
• Filing and prosecution strategy: how can you make the most of your new or pending patent applications?
• Transactional services: we have a team of specialised IP lawyers who are able to handle the licensing and assignment of your IP portfolio so that it can be best utilised to take advantage of the available tax relief (in consultation with accountants).

Of course, we are not tax accountants, and there are many detailed calculations and decisions involved in making use of the Patent Box and we recommend that you consult accountants about this. If you need help finding an accountant with suitable expertise, please contact us. However, having a detailed knowledge of your IP and strong policies going forward will be a vital first step in those discussions.