Patent Box-Tax Breaks for Intellectual Property


The  UK’s Patent Box regime attains a 10% tax rate for relevant IP profits. The relief is being phased in from 01 April 2013. The Patent Box legislation is complex but seeks to support the R & D tax relief programme. The programme applies to all technology capable of being patented. Qualifying patent offices are either:

  • the UK Intellectual Property Office, or
  • the European Patent Office, or
  • national offices of certain EEA States (Austria, Bulgaria, Czech Republic, Denmark, Estonia, Finland, Germany, Hungary, Poland, Portugal, Romania, Slovakia, and Sweden)

Relevant intellectual property includes

  • Licenses / royalties of rights over a patent or patented item or process
  • Sale of patent itself
  • Direct sale of patented product; product containing patented component; components wholly or mainly designed to be incorporated into patented product
  • The use of patents in internal processes or to provide services
  • Licensees of patents provided license is exclusive and countrywide
  • Infringement / damages / insurance income from patent rights

To access the Patent Box, the company must undertake “qualifying development”, by making either

  • contributions (cost / time / effort) to the creation or development of the invention claimed in the patent; or
  • activity to the development of a product / process incorporating this invention

If the company is a member of a group it can meet this requirement by actively owning the patented invention by taking a significant role in managing the portfolio of eligible patents.

Tax relief applies to profits from:

The company must elect into the programme within two years from the end of the accounting period in which the relevant profits arose. The company can also elect to include profits from a “patent pending period” to the profits of the period once the patent is granted.

Tax Entry costs into the Patent Box will require careful appraisal, for more information contact us…. (contact link)

A further stimulus is the announcement in February 2013 of a single UK / EU registration scheme, short cutting separate territorial registrations. Click here for more…..