The Patent Box is a UK corporation tax incentive designed to encourage companies to keep and commercialise intellectual property (IP) within the UK
What is Patent Box?
The Patent Box is a UK corporation tax incentive designed to encourage companies to keep and commercialise intellectual property (IP) within the UK. By allowing companies to apply a reduced rate of Corporation Tax on profits earned from patented inventions and other qualifying intellectual property rights, the Patent Box supports innovation by making it more financially rewarding to develop and exploit patents.
Under the Patent Box regime, profits earned from qualifying patents are, broadly speaking, subject to a lower effective Corporation Tax rate of 10%, compared to the current headline rate of 25%, which can have a significant impact on your overall tax burden.
The regime is particularly beneficial for companies with valuable IP who are looking to capitalise on their inventions while maintaining their commercial presence in the UK.
Could Patent Box be Relevant to Your Business?
The Patent Box could be highly relevant to your company if you hold patents or exclusive licenses to patents that are actively generating income. Whether your business is in manufacturing, pharmaceuticals, technology, or any other sector where innovation drives profitability, you may be eligible to benefit from the reduced tax rate on profits derived from your patented inventions.
In order to qualify, your company must meet several conditions, including:
Qualifying IP Rights – Typically, this includes patents granted by the UK Intellectual Property Office, the European Patent Office, or other approved authorities under international conventions.
Development Requirement – The company must have been actively involved in the creation or development of the patented invention, or in activities contributing to its further development or commercial use.
Income from Qualifying Patents – The Patent Box applies to profits derived from the commercialisation of qualifying IP, which can include income from the sale of products that incorporate the patented invention, licensing royalties, or even damages received for patent infringement.
If your company is generating income from patents and meets the above requirements, Patent Box could provide you with tax savings. However, the calculations required to determine eligible profits and tax relief can be complex, and the specific rules for qualifying income and profit calculations must be carefully followed.
How We Can Help
Our experienced tax professionals can assist you in assessing your eligibility, calculating qualifying profits, and ensuring compliance with the relevant legislation. From determining whether your intellectual property qualifies, to managing your Patent Box election, we will guide you through each step to ensure you take full advantage of the available tax relief.
Additionally, there are links between the Patent Box and the Research & Development (R&D) tax relief. We can help you to understand these interactions to help maximise your overall tax savings.
If you think your company could benefit from the Patent Box regime, or if you’re unsure whether your intellectual property qualifies, we can help. Reach out today to learn more.
Get in Touch
We love meeting new, exciting businesses. Get in touch with our team to see how we could enhance and protect your financial position.
Or if you’d prefer to speak to someone directly just give us a call on: 08000 664 664 or email: hello@wrpartners.co.uk.
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