Patent Box

Does your company own a patented invention, or are you considering filing for a patent? If so, you could be eligible for a reduced corporation tax rate for profits generated from patented inventions.

The Patent Box regime is a form of corporation tax relief from HM Revenue and Customs (HMRC), designed to encourage companies to keep and commercialise intellectual property (IP) in the UK. It allows companies to apply a lower rate of corporation tax—10% to profits earned from their patented inventions and certain other IP rights.

How Does the Patent Box Work?

Businesses liable to corporation tax who make profits from exploiting patented inventions can benefit from a reduced rate of tax of 10%, rather than the company’s normal rate of corporation tax, being 19%, 25%, or in the marginal rate. 

Patent owners sometimes licence their patented inventions for others to develop. If your business owns the licence to use others’ patented technology, it may still be able to benefit from the Patent Box reduced rate of tax. Additionally, if you have an exclusive licence to use a patented invention, on which you perform what is known as “qualifying development,” you can benefit from the Patent Box tax rate. 

Is My Business Eligible for the Patent Box?

To benefit from this reduced rate of corporation tax, a business must:

Be a UK limited company paying corporation tax
Have developed an innovative product or process, filed a patent application, and generated profits from exploiting the patented invention, OR
Own or exclusively licence-in patents granted by the UK Intellectual Property Office (IPO), the EU Patent Office, or one of 13 other listed countries in the EEA
Have made a significant contribution to the creation or development of the patented invention or a product incorporating the patented invention

How Can Ryan Help with a Patent Box Claim?

To make a claim for Patent Box tax relief, a company must elect into the Patent Box scheme within two years after the end of the accounting period in which the profits and income arose. Ryan’s innovation funding specialists can support your business in making an election in the computations accompanying your company tax return, or separately in writing.  

Our specialists will assist with your Patent Box calculation, work out the profits generated from your patented products (and profits generated from patents applied for but not yet granted, as the relief is rolled up and given upon grant of the patent), and record them on your behalf in your tax return. We will then prepare and attach a Patent Box report to the corporation tax return providing further information on the calculations. Please note, “streaming” of income and expenditure is compulsory for each individual patent or IP right, so it is important that your business maintains detailed recordkeeping. 

What’s more, the Patent Box claims can be made alongside research and development (R&D) tax credits claims. If you are conducting R&D, this is a good indicator of your company’s potential for a Patent Box claim as the criteria for “innovation” is very similar.

Companies receiving profits from patents directly as a result of R&D can claim the Patent Box treatment on top of any R&D tax relief they received when developing the product. These savings can then fund the next generation of research to produce patented products.

Taking advantage of both tax relief schemes can significantly reduce your tax liabilities. The cost of obtaining a UK patent could easily be outweighed by the tax reduction obtained via a Patent Box claim.

Connect with an Expert

To find out if you can benefit from the Patent Box, get in touch with our experts by completing the form below.