The UK Patent Box

The UK Patent Box came into force on 1 April 2013 and provides companies with the opportunity to apply a 10% rate of corporation tax to worldwide profits attributed to patents and certain other forms of intellectual property (IP). Combined with Research and Development (R&D) tax relief, there may be an opportunity for a significant reduction in corporation tax.

Patent Box

Qualifying Patents

The Patent Box will apply to products, and processes covered by patents, which have been granted by the UK Patent Office under the European Patent Convention, and patent offices of certain EEA countries. It does not apply to trademarks, brands and copyrights.

In addition it has to meet the “development condition”. Broadly speaking, a company must have significantly contributed to the creation or development of the patented invention.

Patent Pending

Patent applications that are pending are not eligible, however, provided that the company with a pending patents elects into this scheme, the reduction in corporation tax may be applied to the period between the application and grant of the patent for up to 6 years.

Qualifying Businesses

The Patent Box will be available to most companies within the scope of UK corporation tax. Individuals, partnerships and limited liability partnerships are not eligible.

Qualifying Profits

The Patent Box only applies to profit attributed to qualifying patents, not the total gross profit. Income from selling patented products can also be included.

Calculating Patent Box Profits

A formulaic approach will be used to calculate Patent Box profits. Companies will need to ensure that systems are in place to capture the data necessary to undertake the calculations, and some information for prior years may also need to be extracted.

Research and Development Tax Relief

Combined with Research and Development (R&D) tax relief, there may be an opportunity for a significant reduction in corporation tax. 

Phasing In

The full relief will be gradually phased in from 1 April 2013, with the full 10% relief only being available from 1 April 2017. The appropriate percentages for each financial year are:-

  • 1 April 2013 to 31 March 2014: 60%
  • 1 April 2014 to 31 March 2015: 70%
  • 1 April 2015 to 31 March 2016: 80%
  • 1 April 2016 to 31 March 2017: 90%
  • From 1 April 2017: 100%

Free Initial Consultation - Contact Us

For further information, or to discuss whether the Patent Box would be advantageous in your particular circumstances, please telephone Ian Leigh or Jon Isaacs on 020 7309 2222.