Unlocking business value through intellectual property: protection, patent box, and capitalisation
In today’s innovation-driven economy, intellectual property (IP) is often one of the most valuable assets a business owns. Yet, many companies overlook the strategic importance of protecting and leveraging IP, especially when preparing for a sale or investment. This article explores how businesses can safeguard their IP, utilise the UK’s Patent Box regime, and capitalise IP to enhance their balance sheet and overall valuation.
Protecting intellectual property: the foundation of value
IP encompasses patents, trademarks, copyrights, trade secrets, and design rights. Protecting these assets is essential, not only for legal security but also for commercial leverage.
Key steps to protect IP include:
- Registering patents and trademarks to secure exclusive rights
- Implementing confidentiality agreements to safeguard trade secrets
- Conducting regular IP audits to identify and document all intangible assets
- Monitoring and enforcing IP rights to prevent infringement
A well-protected IP portfolio signals to potential buyers or investors that the business has defensible competitive advantages and long-term revenue potential.
Leveraging the patent box regime
The UK’s Patent Box regime offers a significant tax incentive for companies that profit from patented inventions. Eligible profits are taxed at a reduced rate of 10%, compared to the standard corporation tax rate of 25%.
Benefits of the Patent Box include:
- Increased post-tax profitability, which can boost valuation
- Encouragement of R&D investment, aligning with innovation strategies
- Enhanced attractiveness to buyers, especially in tech, pharma, and engineering sectors
To qualify, companies must:
- Own or exclusively license patents granted by the UKIPO or EPO
- Actively develop or exploit the patented technology
- Elect into the Patent Box regime and track relevant income streams
Capitalising IP to strengthen the balance sheet
Capitalising IP means recognising it as an asset on the balance sheet rather than expensing it. This can significantly enhance a company’s net asset value, an important metric in valuation discussions.
Why capitalise IP?
- Improves financial ratios, making the business more attractive to acquirers
- Demonstrates strategic investment in innovation and brand development
- Supports higher valuations, especially in sectors where intangible assets dominate
To capitalise IP, businesses must:
- Ensure the IP meets recognition criteria under accounting standards (e.g., IAS 38)
- Document development costs, legal fees, and other expenditures
- Maintain robust records to support valuation and due diligence
Preparing for sale: IP as a value driver
When preparing for a sale, IP should be front and centre in the value narrative. Buyers increasingly look for:
- Clear ownership and protection of IP rights
- Evidence of monetisation, such as licensing or product sales
- Strategic alignment of IP with market opportunities
A well-articulated IP strategy, supported by Patent Box tax benefits and capitalised assets, can significantly increase the perceived and actual value of a business.
How Azets can help
At Azets, we work with businesses across a wide range of sectors, including technology, manufacturing, pharmaceuticals, engineering, and creative industries, to help them realise the full value of their intellectual property. Our multidisciplinary teams bring together:
- IP specialists with extensive experience on Patent Box, IP audits, and R&D tax relief
- Tax specialists supporting on pre and post deal structuring, capital gains tax planning, and compliance
- Corporate finance advisers who are perfectly placed to support shareholders seeking external investment, looking to realise value, or needing strategic advice on their long-term objectives
- Valuations and forensic accounting experts who can provide business and IP valuations
- Due diligence teams providing both buyer and vendor financial and tax due diligence for companies with intellectual property
By applying our knowledge and experience, we support companies in shaping financial strategies that unlock greater value from their intellectual property while ensuring full compliance with UK and international tax legislation.
Get in touch with a one of our specialists to discover how we can help you turn your IP into a strategic advantage.