Aerospace & Defence R&D Tax Credits

In recent years, intangibles (including intellectual property such as design rights, industrial secrets, trademarks and patents) have played an increasing part in company valuation.  In 2020 intangibles  were estimated to represent 70% of global company value. A study by the European Patent Office in 2021 also showed that companies which own at least one patent, registered design or trademark generate on average 20% higher revenue/employee than those without any IP rights.

Given this backdrop, it’s important that management teams in aerospace and defence sectors are aware of the IP within their business and they have a plan to effectively exploit this

With recent reports that four of the top five recipients receiving the most funding from the UK Government’s innovation agency (Innovate UK) are in the aerospace industry, and the recent announcement of a £273 million investment to improve aerospace innovation technologies, the UK government  is keen to encourage further investment in innovation in the aerospace industry. As a result, there are plenty of grant funding options available to help AD&S companies innovate and stay competitive

You could receive tax credits or tax deductions for your research and development expenditures. This helps reduce the financial burden of innovation and could allow you to reinvest the saved funds into further R&D initiatives, further accelerating innovation within your business and propelling the aerospace, defence and space  sectors forward.

The benefits extend beyond immediate cost savings, as the R&D tax relief promotes growth, drives competitiveness, and fosters a culture of continuous improvement within the industry.

The Patent Box scheme is very generous. It allows eligible companies to apply a reduced rate of corporate tax (10% as opposed to the current 25%) to profits derived from the sale of products or services containing a qualifying patented innovation or IP – resulting in increased cash flow and improved financial performance. This encourages innovation and investment in R&D, as companies can enjoy significant tax advantages when commercialising their patented inventions.

The Patent Box also promotes the protection of intellectual property rights, as it incentivises companies to actively pursue patents and safeguard their valuable innovations.  Overall, the Patent Box is a powerful tool for aerospace and defence companies to maximise the value of their intellectual property, drive competitiveness, and stimulate further technological advancements within the industry.

• Are you a UK-based company that pays UK Corporation Tax?
• Do you hold qualifying intellectual property rights, such as granted patents or exclusive licenses for patented inventions? These patents must be granted by the UK Intellectual Property Office, the European Patent Office, or certain other specified countries.
• Have you undertaken qualifying development activities related to the patented inventions? This includes activities like conducting research, designing, and developing the patented technology or its applications.
• Are you actively involved in exploiting the patented technology by actively licensing it, selling products incorporating the patented technology, or using the patented technology to generate income?

If you meet these criteria, you can register for the scheme and then calculate a “patent box profit” annually for each patent you are commercialising.