It allows companies to apply a lower rate of Corporation Tax to profits earned from patented inventions. The lower rate of Corporation Tax stands at 10%, whereas the usual rate is 19-25% depending on profits.
Companies must elect into the Patent Box scheme to benefit from the lower rates. With the most recent increase to Corporation Tax in 2023, and further increases not ruled out in the future, the potential Patent Box savings are greater than ever before.
To benefit from the scheme, you must:
As you’d expect, valid patents qualify for Patent Box relief. However, it is also possible to claim Patent Box relief on supplementary protection certificates (SPCs), and certain plant breeders’ rights may also qualify. If in doubt, a Forresters attorney would be happy to examine your IP and confirm whether or not you qualify.
No, patents you own, or exclusively license in, can qualify as long as they are granted by one or more of the UK Intellectual Property Office (UKIPO), European Patent Office (EPO) or a patent office in one of the following countries in the European Economic Area:
You can claim reduced Corporation Tax on all “qualifying income.” All worldwide profits generated from a patented product or service should qualify, including license fees and/or royalties generated by the patent and including the sale of qualifying IP rights and exclusive licenses. Also included are amounts received from the infringement or alleged infringement of qualifying IP rights.
To claim, you need to elect into the Patent Box scheme with a granted patent, within two years after the end of the accounting period which contained the relevant profits and income.
Patent Box relief only applies to Corporation Tax. If you do not already pay Corporation Tax, you will be ineligible to claim Patent Box tax relief.
If you already own a patent, you may be able to make use of the Patent Box scheme right away.
If not, obtaining a patent is the first step. In either case, contacting Forresters is the best way to get the ball rolling.
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