Inventors, patent attorneys and VAT on patent fees

If you use a patent attorney to help you patent your invention – and you should, because it can be false economy not to – it will cost you a lot of money, particularly when renewal fees roll round. It would help inventors if all unnecessary cost could be taken out of the process. A prime candidate is the VAT on official fees that patent attorneys add to their bills to inventors.

It shouldn’t be there, because official patent fees are zero-rated for VAT. But if you route all your patent filings and renewals through your patent attorney, you’ll most likely end up paying VAT on them after all. This is because most patent attorneys are VAT registered. Their bill includes all the official fees, and the total has VAT added.

That means you’re paying 20 per cent more for your patent fees than you need to. And if HMRC doesn’t want the money, what happens to it? It seems your patent attorney keeps it.

This probably doesn’t bother your patent attorney’s corporate clients, who will themselves be VAT registered and so can offset the cost against their own VAT payments. But it will bother inventors and small unregistered businesses because they can’t reclaim the VAT.

Given that it’s a cost inventors shouldn’t be paying in the first place, patent attorneys really should be doing something about VAT to help their private inventor clients. We’re not tax or VAT experts but surely it should be possible to bill the official fees separately and not charge VAT? Or discount their service charge by an amount equivalent to the VAT on the official fees?

Inventors have raised this issue with the United Innovation Association UK (UIAUK).

‘Charging inventors VAT on fees that are VAT-free is not morally justifiable,’ says UIAUK founder Simon Brown, himself an inventor. ‘It’s another instance of inventors losing out by being private individuals rather than businesses. If we’re going to encourage more UK innovation there has to be a level playing field for everyone. Patent attorneys actually have a great opportunity here to help invention by ensuring that inventors don’t pay VAT unnecessarily. It can be a win-win situation if it makes invention more affordable.’

We’d like to hear the views of patent attorneys who are aware of this anomaly and have found a solution to it. At present, we don’t know of any. Perhaps the Chartered Institute of Patent Attorneys (CIPA) has a view?


One Comment

  • 4 Jul 2011 | Permalink |

    My understanding is that VAT need not be charged on UK IPO official fees, in particular, and we simply separate the fees on our invoices and never charge VAT on UK patent filing fees. PCT fees are paid to the UK IPO and so we do not charge VAT on these either. 20% of £2372 (the current official fee for a basic PCT filing with GB priority claim) is a large sum!

    Robert Games
    Partner, Albright Patents LLP