Patent box

What is Patent Box?

Patent Box offers eligible companies the opportunity to benefit from a 10% effective tax rate on profits generated from certain patents. 

This relief was introduced to encourage companies who hold and exploit intellectual property (IP) in the UK. It enabled them to benefit from a lower effective corporation tax rate on those profits. 

The scheme has become increasingly appealing, particularly following the rise in the main corporation tax rate from April 2023. This has significantly enhanced the tax benefits of the Patent Box. 

Major changes were implemented for the new Patent Box regime, which became mandatory from 1 July 2021. This may have deterred potential claimants due to complexities in the transition rules for moving from the old to the new regime. Existing claimants should also consider seeking assistance to develop a robust and optimised claim methodology. 

Does your business qualify for Patent Box?

To qualify for the Patent Box under UK corporation tax, a company must meet the following criteria: 

• Own a qualifying IP right or hold an exclusive licence for a qualifying IP right. This includes patents granted by the UK IPO, the European Patent Office, and the patent offices of selected EU member states 
• You (or another group company) must have been involved in developing the patented invention or be actively managing and exploiting the IP
• You must have conducted some qualifying research and development (R&D) activities related to the patent income stream
• You must be generating profits from the ‘patented’ IP to benefit from the regime
   

Under the new Patent Box regime, a company may need to calculate its Patent Box benefits on an IP right-by-right basis. If you believe the Patent Box regime could be advantageous for you, consider taking these steps before claiming relief: 

• Track your patent-related income and expenditure 
• Maintain an up-to-date list of patents (both pending and granted) 
• Keep records of any R&D spending related to your relevant IP