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Patent Box

Companies exploiting patented products, processes and innovations can slash their Corporation Tax bill

What is the benefit of the Patent Box for my company?

By electing to apply the Patent Box regime, your company can benefit from a 10% rate of Corporation Tax on its income from patented products, or processes. That is a generous tax break even with the current standard rate of Corporation Tax at 19%. It will become considerably more generous in the financial year 2023 when the main rate of Corporation tax jumps up to 25%.

The Patent Box has been with us since 2013.

It was introduced to encourage companies which make a profit from exploiting patented inventions to retain their intellectual property in the UK. The Patent Box achieves this by allowing companies to benefit from a significantly reduced rate of Corporation Tax on profits derived from its patented inventions. Companies which meet certain conditions could even benefit from a six-year look back ability.

Is my company eligible for the Patent Box?

Under the current regime a company can elect into the Patent Box if:

  • it pays UK Corporation Tax;
  • it makes a profit from selling patented products or processes;
  • it makes a profit from producing products using patented techniques;
  •  it owns the patents or has an exclusive licence to exploit them;
  •  the patents have been granted by the UK Intellectual Property Office, the European Patent Office or other stipulated Patent Offices in countries within the European Economic Area;
  • it has been significantly involved in the creation of the patented invention or a product which incorporates it

What is “income from exploiting patented inventions”?

Broadly speaking, you can apply Patent Box treatment to income from the following:

  • selling the patented product or products which incorporate the patented invention
  • licensing patent rights
  • selling patented rights
  • damages or other compensation related to patent rights
  • manufacture using a patented process
  •  providing a service using a patented tool or process

This is not an exhaustive list.

Are the Patent Box rules complex?

In a word, yes. The calculation of relevant patent income is complicated and for that reason many professional firms prefer not to advise on it themselves. At Friend Partnership, we have been providing a Patent Box service to our clients since the regime was first introduced in 2013 and have a detailed working knowledge of the process and the complex legislation which underpins it.

Next steps

If you believe that your company qualifies for the Patent Box and you would like information, help and advice on how best to exploit it, please contact David Gillies on 0121 633 2000 or by email to david.gillies@friendllp.com

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