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Business Analysis & Features

Patents: UK inventors can now box clever

Promise of a new tax break sees a 20 per cent rise in patented products. Mark Leftly reports

In a £360 "Supa Dupa" pushchair, two children aged up to four years old are seated side-by-side, their brightly coloured leg covers adorned with big red bows or, for those destined to rule the playground, skulls and crossbones.

What really appeals to stressed-out parents, though, is the hood. A tablet computer or smartphone can be placed within it so that children are kept quiet, concentrating on Robert the Robot clean Justin's House or Nanny Plum wind-up the elves in Ben and Holly's Little Kingdom.

"We got the idea from watching parents hand their iPhones to children while they were pushing them along," explains Andrew Kluge, the chief executive at Cosatto, the Bolton-based firm behind the Supa Dupa, right. "This is an innovative way of getting the device into the hood and into position."

That design is now with the patent office, as the £14m-turnover baby equipment manufacturer looks to ensure it can take commercial advantage of its own efforts. Just a few years ago, Kluge probably wouldn't have bothered.

However, next month's introduction of a tax break, known as the patent box, was the tipping point that meant it was worthwhile going through the drawn-out process of protecting the company's ideas.

Once the patent is secured, the "multi-media gadget holder with speaker", will be registered to go in the box and sales will be subject to just 10 per cent corporation tax rather than 23.

First mooted under the Labour government in 2009, the patent box was finally confirmed in last year's Budget. Almost immediately, pharmaceuticals giant GlaxoSmithKline announced it would spend £350m in Cumbria, its first new British manufacturing site in nearly 40 years.

The patent box was geared towards attracting such major employers to remain in the UK or come over for the first time, their research and development investment rewarded by handing over less to the Treasury. British inventors known around the world, such as Trevor Baylis and Sir James Dyson, would also be more likely to see financial rewards for their creations.

Estimates suggest the cost to the Exchequer could be as much as £1bn, though the rewards of protecting jobs and preventing companies moving offshore should ultimately outweigh those costs.

This is part of a broader international race between governments to create the most attractive, light-touch tax regimes to woo multi- national money as public finances the world over continue to be hit by the financial crisis.

The UK has also relaxed anti-tax haven rules, known as "controlled foreign companies" rules.

"This is now becoming a very attractive place for overseas' investors," argues Andrew Hickman, an international tax partner at KPMG. "We've shot right up the league in terms of tax regulation, when we were in the relegation zone."

However, Ilya Kazi, a patent attorney at intellectual property lawyer Mathys Squire, says that the "positive, unintended consequence" is that smaller, family-run firms that sell no more than £20m are suddenly much more interested in inventing. This means that the old cliché, that "the UK is good at inventing and the US is even better at commercialising", could soon be redundant.

From internet security systems to ideas for heat pumps that are more efficient than traditional boilers, Kazi estimates that he has seen a 10 to 20 per cent increase in the number of patents filed. More importantly, a lot of these are from firms that have never before looked to come up with anything ground-breaking.

He argues: "So many firms are run by accountants and finance directors now and before they saw this sort of thing as costing them money. With a tax break, they're now asking: 'What reason is there why we can't go and invent something?'"

The hope is that the answer will typically be "absolutely none at all", so that the UK is once again recognised as the mother of invention.