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Halving the tax burden for IP innovators with patents

The ‘Patent Box’ scheme was set up in 2013 to incentivise companies to create new patents or leverage existing ones. The government believed this would create jobs and stimulate the economy.

 

To qualify, companies need to:

  • Have developed an innovative product and filed a patent application
  • Generated profits related to the patented product process or product
  • Be a UK Limited Company
  • Pay UK Corporation Tax

 

Patent Box was set up by HM Revenue & Customs, essentially to incentivise businesses to remain within the UK. The reward for keeping their qualifying intellectual property (IP) within the UK is a reduction in the corporation tax rate on qualifying IP income to 10%. This allows companies to decrease their corporation tax bill by 50% for profits derived from patents.

Claiming relief

Businesses with qualifying patents need to join the Patent Box scheme. Any claim needs to be made within 2 years of the end of the accounting period in which the relevant profits were made. E.g., If profits were made in the year ended 31 December 2020, a claim can be made up until 31 December 2022.

Cutting corporation tax to 10%

Any company with qualifying patents can reduce the effective tax rate on profits from said patents to 10%. This is achieved by applying to join the Patent Box scheme. The process includes the identification of the relevant IP profit streams for a given accounting period, then applying the lower tax percentage.

Which patents and companies are eligible?

For a patent to be qualifying, it needs to be granted by the UK Intellectual Property Office, the European Patent Office or by a number of countries in the European Economic Area. Companies that receive patent royalties, use patented processes, or sell patented products can benefit. To reduce its tax bill, a company has to hold qualifying IP rights, or an exclusive license in respect of qualifying IP rights.

Think you have a claim? Come to us for expert advice

Companies receiving qualifying profits are encouraged to claim this deduction and therefore achieve significant savings. Our expert tax team can assist you with the preparation of the claim and the submission required for election.

What we do?

We will liaise with you to understand your patented product or process in detail before analysing and calculating the profits that have been specifically generated from your patent. We will also prepare a Patent Box Report that will be attached to your amended Corporation Tax Return upon submission to HM Revenue & Customs.

Want to Claim?

Our experienced team can quickly assess whether your business can benefit from the above tax relief schemes. Get in contact today.

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