Accept Cookies?

About:

Check our credentials

Our staff

Jobs & vacancies


Customer service:

Contact us

Terms of business

Privacy policy

Complaints handling policy

Conflicts of interest

Legal:

Regulated by IPReg

Registered in England & Wales No: 07491607

Copyright & trade mark notice

Cookie policy

Tools:

Client login

E-sign our terms of business


h u t c h i n s o n  i p UK & EUROPEAN PATENT & DESIGN ATTORNEYS
About Services Information Contact
Home

The “Patent Box” is a newly-introduced tax relief scheme that is available to companies liable to UK Corporation Tax (CT) as of 1 April 2013.  Companies that have profits derived from patented technology may be able to claim a CT reduction.  The Patent Box scheme operates in parallel with, and in addition to, the existing R&D Tax Credits scheme.

HOW DOES THE PATENT BOX WORK?

As of 1 April 2013, UK companies liable for Corporation Tax (CT) may be able to benefit from a reduced rate of CT on profits earned after that date from its patented inventions.  The CT reductions will be phased-in in stages, with the full reduction being available from  1 April 2017.

To qualify, companies must be liable to UK Corporation Tax and make a profit from exploiting patented inventions.  This means that the company must own, or exclusively license-in, the patents (which must be granted in the UK, EPO, Austria, Bulgaria, Czech Republic, Denmark, Estonia, Finland, Germany, Hungary, Poland, Portugal, Romania, Slovakia or Sweden), and the company must also have undertaken “qualifying development” on the the patented technology. Special provisions also apply to companies in groups that exploit patented technology where other members of the group own, or license in, the patent(s) in question.

The Patent Box CT reductions only apply to profits from the patented technology, and not to all of the profits of the company.  Relevant IP income includes profits arising from: selling patented products, licensing out patent rights, selling patented rights, infringement income, damages, insurance or other compensation related to patent rights and the use of a patented manufacturing process.

As such, companies need to specify qualifying patent-related profits in their accounts, and to apply the CT reductions using a specified formula to avoid complications if the company claims losses or other relief.  Any Patent Box CT reductions must be claimed within two years of the end of the accounting period in which the relevant profits and income arose.

Your accountant will, of course, be able to advise you in detail, and we will be able to assist from the patent side.  However, further information can be found on HMRC’s web site (here), and there is also a downloadable webinar (here) designed to help SMEs understand both the new Patent Box scheme and the existing R&D Tax Credits scheme (here).

WHAT THIS MEANS IN PRACTICE:

If your company already owns patents, and makes profits from the exploitation of patented technology, you may be able to benefit from a reduction in your CT bill from April 2013.  

If you company has one or more pending patent applications (applied for, but not yet granted), there is now a stronger case for accelerating the examination procedure to benefit sooner from the Patent Box. Nevertheless, there are provisions in the Patent Box scheme that allow companies to make backdated claims to cover patent-related profits arising in the “patent pending” period.

If you company is developing new products or processes, consideration should be given to applying for patents for those new products and processes - not only from the perspective of being able to protect your R&D investment, but also to benefit from CT relief should the technology turn out to be patentable.  In addition, due consideration should be given to whether or not the R&D that you may be involved in qualifies for relief under the R&D Tax Credits scheme.  

In all three cases, you need to consult your accountant and patent attorney as soon as possible.

CORPORATION TAX REDUCTIONS ARE NOW AVAILABLE FOR REVENUES DERIVED FROM PATENTED TECHNOLOGY

Patent box