Patent Box scheme provides reduced corporation tax on patent-related profit
Many companies have made claims under the Patent Box scheme that was initially introduced in April 2013. The measures aim to provide a boost for innovative businesses within the UK, and Patent Box provides companies generating profit from patented inventions with the benefit of a 10% rate of corporation tax in relation to their patent-related profit.
Slightly modified regimes were introduced in 2016 and again in 2017 to track the profit from the patented invention as compared with, for example, services or maintenance, and to take account of global profits, and any cost sharing arrangements. Effectively the 10% tax rate to reward UK companies that are exploiting patented IP rights remains.
Requirements: the patent
The Patent Box only applies to:
* Granted patents (i.e. the patent cannot be pending). However, once the patent reaches grant, then the Patent Box claim can be backdated, for a period during which the patent was pending. The scheme is designed not to hinder companies where the application process for a patent takes a few years. In this respect, any patent profits derived between the date of application and the date of grant can still be included in a Patent Box claim, but only once the patent is granted.
* Patents that are in-force (i.e. renewal fees must have been paid).
* Patents that have been prosecuted at the UK Patent Office (UKIPO) or European Patent Office (EPO).
Furthermore, to be eligible for the Patent Box, the company must “hold” the patent i.e. own the patent or have an exclusive licence to the patent.
Requirements: the patent-related profit
* The profit must be attributed to a patent-protected invention (this profit may be derived from licensing of the patent, sale of the patent, sales of products that incorporate the invention etc).
* As regards products that incorporate the invention, the only requirement is for the product to contain a patented feature; it is not always necessary for the entire product to have patent protection.
* Profits derived from qualifying Intellectual Property Rights will benefit from a 10% rate of corporation tax.
* Claims for Patent Box can be claimed up to 2 years from patent grant.
For some large companies, it may be worth applying for UK patent protection for no other purpose than to benefit from the reduced rate of corporation tax. Whilst this may not be the case for smaller companies, it is certainly a bonus for those already in possession of UK patents or who are likely to hold UK patents in the future.
Funding available for IP Audits
Government funding is also available via a scheme offered with the UK Intellectual Property Office (UKIPO) for funding of IP audits. An IP audit can enable a business to establish the scope and format of its Intellectual Property. Please see our website article on IP Audits.
We’re here to help
We are happy to answer any questions you may have on Patent Box, IP Audits, assessments or invention harvesting, or to assist with a presentation on any or all of these topics. Please get in touch with us on 023 8000 2022 or email firstname.lastname@example.org.