The Patent Box tax relief is the Government’s way of rewarding companies that are driving innovation. The aim is to encourage the development of new patented inventions in the UK.
If your company is making a profit on your patented inventions, you will be eligible for a lower effective corporation tax rate of 10% on your relevant profits. This will save your company money and allow you to invest in future innovation. With the corporation tax rate set to increase to 25% for some companies from April 2023, this saving becomes even greater.
Companies must elect into the Patent Box to apply the lower rate of Corporation Tax which is 10%.
Your company will qualify for relief if:
- You own patents, or
- You own an exclusive licence to exploit a patent
- It’s a UK, specific EEA country or EU patent (& certain other rights)
Qualifying income includes:
- Sale of patented items or those that incorporate a patent.
- Licence fees.
- Proceeds from sale of patents.
- Compensation income from infringement of owned rights.
Only profits derived from UK, EU or certain EEA patents qualify, along with a few other rights (plant breeders rights and supplementary protection certificates). The company exploiting the patent also has to have been involved in the development in some way.