Guide to Patent Box

What is Patent Box?

Patent Box is a government incentive scheme to motivate companies to further commercialise their patents.

Of course, there are particular eligibility criteria to be met, but if your company is making a profit from your patents, then Patent Box could be a good source of extra funding. But you won’t automatically be included; you must make an official application – that’s why so many businesses are missing out.

Guide to Patent Box tax credit guide

What’s it worth?

Basically, a reduced rate of 10% corporation tax will be charge on any profits from the sale of products that include patents. Considering the usual rate is around 20% – this is a substantial saving!

Does it apply to my business?

These are the key eligibility criteria for the Patent Box scheme:

  • Your company owns patents, licenses-in patents and has “undertaken qualifying development on them” (HMRC)
  • Your business pays Corporation Tax
  • Your business makes profit from the sale of patented products or items for which you hold the Intellectual Property rights
  • Group companies have different rules, but your business may still qualify

Which patents apply?

Patent Box benefits can be received if you own a patent or “exclusively license-in” patents that have been issued by the European Patent Office, the UK Intellectual Property Offices or the following EEA countries: Austria, Bulgaria, Czech Republic, Denmark, Estonia, Finland, Germany, Hungary, Poland, Portugal, Romania, Slovakia and Sweden.

What is ‘qualifying development’ in Patent Box?

Your company needs to have either made a new product which includes the patented invention, or created the patented item itself in order to satisfy the ‘qualifying development’ stipulation.

Applicable income sources

It is essential to calculate how much of your profits are earned from your IP and patent sales. These are the main areas:

  • Straightforward sales of your patented products
  • Sale of products which include patented parts or items
  • Sale of unique spare parts for the above products
  • Fees earned from licensing out patent or other IP rights
  • Sale of patented rights
  • Awards given for patent right infringements, eg damages
  • Royalties received (“notional royalty”) from creating non patented products using patented processes or tools

Good to know…

  • Patent Box is part of the government’s drive to drive the UK economy by making tax conditions more internationally competitive.
  • You include your Patent Box information on your Corporation Tax Return.
  • Profits made on ‘Patent Pending’ products can still qualify.

Let us wrap up your Patent Box application for you!

As tax specialists, we will look at the whole financial picture of your business and help you maximise your tax reliefs. Patent Box is just one part of a large ensemble of tax reliefs which can directly, and sometimes indirectly, influence each other. Each client receives a bespoke service which ensures an accurate Patent Box application and optimised tax efficiency overall.

Our expertise saves you a lot of time, effort and money for future investment.


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