1. News
  2. Patent Box for medical devices – an incentive for innovation

Patent Box for medical devices - an incentive for innovation

Angela Banerjee
Associate Director
Read time:
Medical device centrifuge

Almost no sector is as complex as medical technology. Highly regulated, fiercely competitive and requiring a highly skilled workforce, developing medical devices isn’t necessarily straightforward. That’s why protecting your innovation is critical – especially in a crowded market. 

Those outside the sector see new medical technologies and tools hitting headlines on a regular basis. From developing diagnostic tests to trialling new instruments or procedures, those within the MedTech sector spend much of their careers improving the UK’s healthcare.

But ForrestBrown understands that these headlines don’t necessarily convey the time, pressure and expertise that goes into each invention. That’s why we want to make sure that businesses operating in the field are accessing the incentives available to support their investment in innovation. 

Patent Box offers a significant benefit to those with a patented medical device. We’ve seen numerous companies maximise the value of their innovation through the scheme – significantly saving on tax relief and freeing up resources to fund the next breakthrough.

Medical device patents – but a lack of Patent Box claims

The impact of innovation in the medical sector has significant social value. The tools and technologies that emerge can cure diseases and have a profound impact on an individual’s life expectancy and livelihood. Given the volume of activity in the field, it is perhaps unsurprising that the sector registers a significant number of patents.

In 2022, there were over 15,000 patent applications made by the medical technology industry, second behind Digital Communication in technical fields. This suggests that medical devices is a busy sector for patents, but the same can’t be said for Patent Box. In comparison, only an estimated 1,600 businesses elected into the Patent Box scheme during the 2022/23 tax year. This demonstrates how few MedTech companies are capitalising on the opportunities that the regime presents.

Why protect your devices and equipment?

Patenting your medical device can be a tricky road to navigate. When designing a new product, you need to consider regulatory frameworks, certifications and assessments – but you also need to consider idea protection. This process generally starts as early as possible, but as initial conception and funding can feel like a minefield, patent applications can feel like an impossible task – one that takes years to complete. And when you consider that the typical shelf life of a medical product is only 18-24 months, it’s not surprising that some companies can overlook the Patent Box regime.

But in an industry as competitive as MedTech, protecting your idea is vital. Considering the high demand for reliable healthcare, companies must consistently find new, innovative ways of developing devices for a variety of illnesses and diseases. This leads to many new products being tested on a regular basis, with the potential for overlap. This is why your idea should be protected at all costs – it’s a way of making sure that you – and not a competitor – receive credit for all your hard work. 

You also need to think of your device as more than an innovation – it’s a commercial opportunity. This means making an impact on your company financially as well as leaving your mark within the industry as a whole. That way, you ensure your business is sustainable and can contribute to future improvements which benefit patients.

Eligible medical device patents

It’s commonly believed that electing into the Patent Box regime is a complicated process. If you have this belief in mind, then it’s understandable why the regime seems like more effort than it’s worth. But you can claim significant tax relief on inventions, such as:

  • New, inventive instruments for surgery and diagnostics, or new methods of making such devices
  • Prosthetics
  • Software that helps monitor a patient’s condition

The government’s guidance states that you cannot claim Patent Box relief on: 

“(a) a method of treatment of the human or animal body by surgery or therapy, or (b) a method of diagnosis practised on the human or animal body.” (Section 4A(1) of the Patents Act 1977 (as amended by the Patents Act 2004)).

It’s worth noting that this exception may be another deterrent for companies considering the Patent Box regime. Treatments cannot be patented as it would prevent the treatment from taking place, but you can still gain patents – and, by extension, claim relief via Patent Box – for your inventions, as long as you fully understand the guidelines. This is where having a trusted tax adviser can be valuable for your Patent Box application.

Unlocking – and protecting – innovation through Patent Box

For the medical device sector, innovation is a part of companies’ every day. A novel product or invention is rewarded by its successful development, seeing people’s lives changing for the better. But you can amplify your financial benefits, too. The Patent Box regime is reducing your tax significantly while building your leverage within the industry.

An ongoing revenue stream

Your device will go through many changes during its development, with various workshops, sourcing and regulations impacting the final product. It’s an exciting part of the process, yet one that can feel like a drain on your funds. 

This is where commercialising your intellectual property (IP) can make all the difference. Through Patent Box, you receive significant tax reductions on revenue generated from your device. For example, if you made £500,000 from your IP, these earnings will be taxed at 10% via the Patent Box regime, rather than the standard 25% Corporation Tax rate. The savings made from this regime will add to your overall profit, helping to cover the cost of manufacturing, materials and even prototypes that were never approved. 

And let’s not forget about R&D. As of 2021, Patent Box and R&D tax are intrinsically linked. So, to claim Patent Box relief, you need to prove that the R&D activities undertaken relate to the IP. Combined, these schemes are a powerful tool that provide you with tax savings throughout the development process, funding your innovation and accelerating your device. 

Knowing that you’ll benefit from these savings means you can price your product more competitively or further invest in its quality, all of which may help you increase your market share. You’ll also increase brand awareness and enhance your reputation, ensuring that your IP is a continued financial success.

A competitive edge

It’s no secret that the MedTech industry is competitive. It’s a sector that’s in high demand, with the NHS spending an estimated £10 billion a year on MedTech. So it’s important for companies to do what they can to make their mark within the industry. 

Your competitive advantage would begin from the moment you patent your device. You have exclusive rights to your product, an innovation that sits solely under your name. This already sets you apart from other companies within the industry, but with the savings generated from Patent Box, you can take this one step further. You can continue to enhance your devices and produce products of a higher quality than others on the market. 

The scheme is also an incentive for future innovations, making sure that you’re continually enlarging the gap between you and your competitors.

Pioneering medical advances

A competitive advantage isn’t the only reason why Patent Box should be used as an incentive for further developments. With the UK pushing to become a leader in science, innovation and technology, Patent Box should be a key tool in a company’s arsenal as MedTech’s role in this vision continues to grow, encouraging them to take the leap and place themselves at the forefront of the industry. 

Knowing that the regime is available – and viable – should provide a confidence boost for those looking to add their own innovations into the mix. You can claim relief on your finalised product, having successfully completed your application with the right support, and use these savings to enhance past devices and instruments or develop another ground-breaking product. 

Investment in R&D can be substantial for medical technology companies, so regimes such as Patent Box are powerful incentives for moving the UK forward in terms of growth, and making a difference to our livelihoods. As mentioned earlier, it’s how we navigate the complexities of the regime – from speeding up the process and determining eligibility to mapping revenue – that’s key.

Claim Patent Box relief for medical devices

At ForrestBrown, our team of tax advisors are leaders in their fields. We’ve worked with companies from a broad range of sectors to claim valuable tax relief through schemes such as Patent Box – including those in the medical industry. 

We’re passionate about Patent Box and the benefits it brings for businesses. With the current Corporation Tax rate at 25%, the regime provides a significant saving for MedTech businesses currently in the midst of designing an exciting new product. We can determine your eligibility and map your revenue to your IP and R&D activity, using our technical expertise to build a robust claim. Our proactive approach ensures that you fully amplify your device. Get in touch with our team today – we’d love to know more about your business.