Patent-box

The Patent Box

A tax regime for patented products and services that could improve your profitability.

If you are generating profits from patented products, services or processes, or receiving income from royalties, then the Patent Box Tax Regime could reduce your tax liability and save you money. It works by allowing you to lower your corporation tax liability to 10% for all profits attributed to patents held in the UK and Europe.

It is important to review your products, services and future offerings to understand if you could apply for patents. Be sure to visit the Intellectual Property Office for more information. Royalties are also applicable to the tax regime and you can find out further information about protecting your intellectual property through license agreements at GOV.UK.

Qualification

Patents have to be granted by one of the UK Intellectual Property Office, the European Patent Office and other EEA State Patent Offices to qualify. The regime applies to legal owners as well as licence holders and companies permitted to exploit patents. A company must either hold a qualifying patent, make a significant contribution to a qualifying patent or perform significant activity in the development of a patented product or innovation.

How the tax regime works

Income from the patented product (or patented part of the product) is identified and the reduced rate of corporation tax applied to the associated profits. Understanding how much of your income is relevant to a patent can be very complicated and easily misinterpreted. For example, you could have patents that relate to the internal working processes of a product or that underpin a service. Therefore the reduced rate of corporation tax can only apply to the profits generated from those particular parts of the product or service.