Introduction to UK Patent Box Tax Relief

The UK Patent Box tax relief is a government initiative designed to encourage companies to keep and commercialise intellectual property within the UK. This scheme allows companies to apply a reduced rate of Corporation Tax to profits earned from patented inventions and certain other innovations.

What is the Patent Box?

The Patent Box enables companies to benefit from a lower Corporation Tax rate of 10% on profits derived from their patented inventions. This relief was introduced in phases starting from 2013 and fully implemented by 2017. The primary goal is to incentivise innovation and the commercialisation of intellectual property in the UK 

Eligibility Criteria

To qualify for the Patent Box, a company must meet the following conditions 

• Liability to Corporation Tax: The company must be subject to UK Corporation Tax.

• Profits from Patented Inventions: The company must generate profits from exploiting patented inventions.

• Ownership or Exclusive Licensing: The company must own or have exclusively licensed-in the patents.

• Qualifying Development: The company must have undertaken qualifying development on the patents, contributing significantly to the creation or development of the patented invention or a product incorporating the patented invention.

Eligible Patents

The patents must be granted by the UK Intellectual Property Office, the European Patent Office, or certain countries within the European Economic Area, including Austria, Bulgaria, Czech Republic, Denmark, Estonia, Finland, Germany, Hungary, Poland, Portugal, Romania, Slovakia, and Sweden 

Benefits of the Patent Box

By electing into the Patent Box, companies can significantly reduce their Corporation Tax rate on profits linked to patented technologies. This can result in substantial tax savings, allowing companies to reinvest more of their profits into further innovation and development 

How to Apply

Companies must elect into the Patent Box to benefit from the reduced tax rate. This is not an automatic process and requires careful planning and documentation. Companies should consult with tax specialists to ensure they meet all the necessary criteria and to optimize their tax relief claims 

Practical Guidance

For companies engaged in Research and Development (R&D), the interaction between R&D tax incentives and the Patent Box can be complex. It is essential to understand how these mechanisms work together to maximize the available benefits. Companies may benefit from consulting with R&D tax advisors who can provide practical guidance on integrating these processes and navigating the associated opportunities and risks 

For more detailed information and assistance with Patent Box tax relief, please contact me at will@rainfordir.co.uk or book a call using the link below.