Patent Box tax relief in the UK enables profits which arise from the use of a patented product or process to be taxed at significantly reduced rates.
Current corporation tax rate is between 20% and 23%, depending on the size of the profits. There have been phasing provisions from April 2013 onwards but from April 2017, 100% of the qualifying profits will be subject to a 10% rate of tax.
The conditions for Patent Box tax relief in the UK are that the company:
There are development and active ownership requirements, there need to be qualifying income, and the company needs to elect to have the relief
The ownership criteria include provisions that the company is registered owner of a patent. If there is more than one patent proprietor, then all proprietors can benefit. The patent can be exclusively licenced, as long as there is exclusive right in at least one territory, with the right to bring infringement proceedings or right to damages, and there has been some development.
The development criteria include provisions that the company must have created the invention, or further developed the invention, or developed any item or process incorporating the invention
There are phasing provisions. The main rate of UK corporation tax is currently 21% from 1 April 2014, reducing to 20% from 1 April 2015. From April 2017, 100% of the qualifying profits will be subject to a 10% rate of tax. In the meantime a proportion of the qualifying profits are subject to the 10% rate with the rest being subject to Corporation Tax. From 1 April 2013 the percentage of qualifying profits subject to the 10% rate is 60%, rising to 70% from 1 April 2014, 80% from 1 April 2015, 90% from 1 April 2016 and finally reaching 100% from 1 April 2017
Patent Box is one tool to use as part of an overall intellectual property strategy. Whilst Patent Box tax relief may be the right strategy, the process and implications of patenting need to be considered carefully in the context of an overall strategy.
For example, patenting your product or process will mean that you will have to disclose your inventions to the world.
This may give your competitors knowledge about what you are doing and what your plans are. It may also allow others to use your patent in countries where you may not have obtained patent protection. Therefore, we review your business with you, and the products you sell and/or the services you deliver. We consider with you the extent to which your profits are eligible for patent box tax relief, or whether they might be eligible in the future.
If they are eligible, then we’ll assess with you whether patenting is the right strategy for your business. Applying for a patent may not be the right strategy if:
You want to keep your processes confidential and as trade secrets.
The profits to be derived from the product or process will not be sufficient to justify the costs of patenting.
If you do wish to file any patent application, we can help you with the filing process, and can help you manage your expenses within your available budget.
This may give your competitors knowledge about what you are doing and what your plans are. It may also allow others to use your patent in countries where you may not have obtained patent protection. Therefore, we review your business with you, and the products you sell and/or the services you deliver. We consider with you the extent to which your profits are eligible for patent box tax relief, or whether they might be eligible in the future.
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