The Patent Box

The Patent Box tax relief regime is used in the UK to incentivise research and development by taxing patent revenues differently.

 

Patent Box is a special tax regime used in the UK to incentivise research and development by taxing profits derived from the sale of patented items differently. Introduced in April 2013 as part of the government’s economic growth agenda, Patent Box is designed to encourage businesses to promote innovation and invest in research and development (R&D), and ultimately retain intellectual property (IP) and corresponding jobs in the UK.

Patent box, also known as intellectual property box regime, enables businesses to make profits through their Patents and reduce the tax paid on those profits. The UK Patent Box is a relief from corporation tax and is only available to qualifying companies.

Companies can make a profit from their patented inventions by:

  • The sale of patented products, or products containing the patented invention
  • Licensing out
  • Selling patented rights
  • Infringement income
  • Damages, insurance or compensation related to the patent rights

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Patent Box qualifying requirements

There are specific eligibility requirements, but essentially if your UK business is liable for corporation tax and you have a UK or EU patent, you could qualify for Patent Box Tax Relief. Your company must have made a significant contribution to the creation or development of the patented item and will need to elect into the Patent Box regime. Qualifying requirements include:

  • Being liable for corporation tax and making a profit from patented inventions
  • Owning the patents, or exclusively license-in the patents
  • Having undertaken qualifying development
  • Made a significant contribution to the creation or development of the patented invention

The calculations for determining the qualifying expenditure for Patent Box Tax Relief are complex. The team at Cooden Tax Consulting specialise solely in Technology Tax Reliefs and are experts in Patent Box Tax Relief. Speak with our Patent Box experts now to see if your patent qualifies.

Don’t miss out on Research & Development Tax Relief. Maximise your tax relief and you have more opportunity to invest in growth.

Electing into the Patent Box regime

The Patent Box is an optional regime, meaning a company can only benefit from the Patent Box if it elects into the Patent Box regime. A company may elect into the Patent Box regime for profits earned in a particular accounting period within 2 years of the end of the accounting period in which the relevant profits arose.

 

Patent Box FAQs

 

Can I claim both Patent Box and R&D Tax Reliefs?

It is possible to use a combination of tax relief schemes, and many of our clients who claim under the Patent Box scheme also claim R&D Tax Relief. However, care must be taken when utilising both schemes. Our experts can help ensure you maximise the benefit.

Do I qualify if my patent is registered in another country?

Yes, but there is a specific list of countries that are in the EU or EEA (European Economic Area), if your patent is not a UK Patent or an EU Patent or from one of the listed countries then you won’t be able to claim.

I have licensed my patent, can I still claim Patent Box Tax Relief?

Yes, generally, you can claim patent box on the royalties associated with the Licence of the patented item, but speak to one of our experts for a fuller picture of what can be claimed and what other costs may have to be taken into consideration!

I have a licence to sell a patented item from a third party, can I still claim Patent Box Tax Relief?

If your business holds licenses to use other’s technology, you could still benefit from the Patent Box. However, there are a number of additional qualifying conditions that need to be met.

Is it possible to make a patent box loss?

Yes. It is not uncommon for the profits to be low during the early phases of a patent so timing for electing into the Patent Box regime is crucial. Our specialist advisers can help to identify the optimum time to elect into the Patent Box tax relief scheme.

How do I claim?

Before you claim, you will need to elect into the Patent Box regime. You can do this alongside your Company Tax return or apply separately in writing. Once you have made an election you can benefit from the reduced rate of corporation tax that applies to the Patent Box.

Relevant profits are calculated using a formulaic method as set out by HMRC. This is a complex process. Our specialist Tax advisers can support you with any R&D Tax Relief or Patent Box Tax Relief claim.

If you feel your company may be eligible for tax relief
we can help you assess your eligibility and
calculate your potential ‘relevant profit’.

For professional advice on these specialist forms of Technology Tax Relief

Contact us for expert advice and assistance