Patent box

Patent Box is a tax incentive aimed at encouraging innovation development in the UK. It was introduced in April 2013 and was phased in until April 2017, since then the relief has been fully available.  It applies a substantially reduced corporation tax rate of 10% on profits arising from patents and patented products, allowing for significant tax savings compared to the current corporate tax rate.

Changes to the Patent Box are underway. The UK government is currently aligning its regime with the principles laid down by the Organisation for Economic Co-operation and Development (OECD).

Companies already using the UK Patent Box regime can continue to do so until June 2021. The new regime will be available for new entrants on or after 1 July 2016 and will operate under the terms of the legislation included in the Finance Act 2016.

Tax incentives for innovation

Combining research & development (R&D) tax credits with Patent Box makes tax incentives available on the whole innovation life cycle, starting from the costs of development through to the generation of profits on patented products, processes and tools.

It is important to seek specialist tax and accounting advice before you apply for your patent. You need to make an election to claim relief under Patent Box when you apply for the patent. You will also need to track the income and profits from the exploitation of your patent to claim the right amount of relief. We can help you to gain maximum benefit from your innovation investment.

Qualifying intellectual property rights

To benefit from Patent Box, your company must own or exclusively license-in patents granted by:

• UK Intellectual Property Office
• European Patent Office
• Qualifying EU member states

Qualifying income

Your accounting system can help you monitor the income eligible for tax relief under Patent Box. We can help you adapt your system to record:

• Sales of patented products;
• Sales of products that contain patented items;
• Sales of spares for patented products;
• Sales of and royalties from patented rights or exclusive licences over patented rights;
• Damages from proven or alleged infringement of patent rights;
• ‘Notional royalties’ for patented tools and processes used to create products or services.

How we can help

We can help you take full advantage of Patent Box by:

Claiming the relief on profits arising from a patent or a patented product for up to 6 years of the ‘patent pending’ period.

Ensuring patent box is claimed for you in your corporation tax return.

Reviewing your existing company structures and planning in order to optimise the level of patent box savings.

Achieving maximum tax reduction by distributing your total taxable profits between R&D credits and patent box relief.

Get in touch with our tax team to find out more about how we can help you.