Patent box relief

First introduced in 2013, patent box relief enables companies to apply a lower rate of corporation tax to profits from patented products and equivalent forms of intellectual property. By reducing corporation tax to as little as 10%, it supports the development and commercialisation of intellectual property in the UK. The regime works alongside R&D and RDEC, meaning businesses can benefit from it in addition to these other incentives.  

There is a detailed calculation in the patent box rules, which sets out how to benefit from the reduced corporation tax rate. Carrying out this calculation is part of the annual tax compliance process where it applies. You receive the benefit through an additional deduction from taxable profits. 

Eligibility for patent box relief

You can work out your business’s eligibility using the following three steps.

Company eligibility: Companies of any size are eligible for patent box relief. It must be liable to UK corporation tax and make trading profits from exploiting qualifying IP rights.

Holding a qualifying IP right: The most common type of qualifying IP is a patent. Patents must have been granted by the UK Intellectual Property Office or a specified European patent office. Some specifically listed other IP rights also fall within scope. A company may benefit if it holds the qualifying IP right itself, or if it holds an exclusive licence for the qualifying IP right.

Calculating relevant IP profits: Companies that are eligible must calculate the profit attributable to those rights to assess the benefit of electing into the regime.

To find out more about R&D tax reliefs and how we can help, please contact James Tetley, Sheetal Sanghvi, Graham Steele or Constantine Costas.