Unlock savings with the UK Patent Box
Did you know that companies subject to UK Corporation Tax can significantly reduce the tax they pay on profits exploited from patented innovations?
The UK Patent Box regime is designed to reward innovation and R&D effort in the UK by allowing companies to benefit from a reduced 10% Corporation Tax rate (compared to the standard rate of 25%) on eligible profits linked to patented inventions, as well as other qualifying IP rights relating to medicinal and botanic innovation rights.
To benefit from the scheme, companies must elect to it. In some cases, election can even be done before a patent has granted, although the timing can be key to maximise savings.
Who can benefit?
The regime is available to companies that:
Eligible patents must be granted by the UK Intellectual Property Office, European Patent Office or certain EEA countries.
A development activity may involve the creation of the invention itself, a product incorporating the invention or a new use of the invention, or significant development activity in the invention or relating to its incorporation in technology.
What income qualifies?
A variety of income may qualify under the scheme, including:
Crucially, profits from worldwide sales of an item protected by the qualifying IP can benefit from a reduction in UK Corporation Tax, meaning the qualifying IP right need not necessarily provide protection in the country of sale.
Moreover, profits may be derived from larger products incorporating patented single component parts, although rights holders should be cautious not to artificially exploit this generous tax incentive solely for the purpose of avoiding Corporation Tax.
Companies should audit their income streams to identify potentially relevant IP-related profits.
More than just big business
Whilst often associated with large corporates, Patent Box is equally valuable for growing small to medium-sized innovative businesses across a range of technologies, including emerging technologies in the field of artificial intelligence.
Many eligible companies are not yet claiming, meaning there could be untapped tax savings waiting to be realised.
A strategic opportunity
When combined with R&D tax credits, the Patent Box can form a powerful, joined-up innovation strategy, providing substantial relief to businesses and incentivising innovative activity in the UK.
Companies interested in seeking this valuable relief should seek specialising tax advice from an accounting professional. A patent attorney can help conduct an IP audit to determine if innovations, products, or manufacturing processes are protectable and advise on how best to leverage a Company’s IP portfolio.
Feel free to contact me with any intellectual property questions.
Mark
Mark joined WP Thompson in 2023 as a European Patent Attorney in the chemistry and life sciences team. Prior to joining WP Thompson, Mark worked for a large multinational patent firm in the…
