The Patent Box enables companies to apply a lower rate of Corporation Tax to profits earned after 1st April 2013 from its patented inventions. The relief was phased in from 1st April 2013 and the lower rate of Corporation Tax to be applied will be 10%.

Who can benefit

You can only benefit from the Patent Box if your company is liable to Corporation Tax and makes a profit from exploiting patented inventions.

Your company must also own or exclusively license-in the patents and must have undertaken qualifying development on them.

If your company is a member of a group, it may qualify if another company in the group has undertaken the qualifying development.

The Patent Box initiative is complementary to the R&D tax credits incentive which encourage companies to undertake their R&D in the UK.

How it works

The claim process is as follows:

  • calculate qualifying income by identifying revenue streams from qualifying patents
  • calculate the profit generated from this qualifying income
  • then calculate residual profit by deducting routine profit made from routine business activities
  • then calculate the Patent box profit by deducting any profits derived from branding or marketing attributes
  • then use the HMRC formula to calculate the corporate tax deduction

Answers to your Patent Box questions

There are specialist R&D Relief units located throughout the UK who are able to assist you with your claim. These units are organised on a geographical basis, dealing with claims from companies whose main research and development base is within their postcode allocation. These units will also answer your Patent Box questions. You can contact them before making a claim or while you are putting together your claim.

In addition, HM Revenue and Customs (HMRC) has a free pre-recorded ‘webinar’ that provides a basic overview and introduction to R&D tax credits and the Patent Box, and explains who is eligible to claim, how to make a claim and where to get further help and advice for your business.

But if your company’s tax affairs are handled by a Customer Relationship Manager or Customer Coordinator in the HMRC Large Business Service or in the Large and Complex teams, you should contact your Large Business Service or Large and Complex office direct.

Read further guidance on The Patent Box

UK Intellectual Property Office

How to claim

Companies must calculate their qualifying Patent Box profit and then apply a specific formula in their tax computation to calculate the deduction in their tax liability. Then they can take the tax deduction as a benefit in their CT600 tax return.