UK Patent Box – delving into the box?

The UK patent box regime is a key part of the Government's growth agenda.

Our latest blog to highlight our top ten key points on the UK Patent Box scheme in its existing form.

1. What is the tax saving?

Perhaps the most important point of them all! Qualifying patent profits are effectively taxed at a reduced corporation tax rate of 10%, therefore corporation tax suffered on qualifying profits is halved.  Other non-qualifying profits continue to be taxed at the main rate of corporation tax.

2. Can my company benefit from Patent Box?

Qualifying companies and corporate partnerships of any size can claim the relief. It’s available to new start-ups as well as to large multinational groups.

However, the scheme is not available to individuals and no similar relief exists for individuals.

3. How does my company qualify?

Your company must hold a qualifying patent or exclusive licence to use a patent in order to qualify. The company must also have made either a significant contribution to the creation or development of the patented invention or a product incorporating the patented invention. The patent must also have been granted and registered by either the UK Intellectual Property Office, the European Patent Office or another specifically specified EEA state office.

4. What if my company’s patent has not yet been granted?

You may still elect into the regime. The Patent Box benefits for the patent pending period (maximum of six years) may be claimed in the year the patent is granted.

5. What income qualifies?

Qualifying income includes the sales of patented products; products incorporating a patented item; spare parts designed for specific patented products and also license fees or royalties arising from intellectual property held by the company.

6. How can I claim Patent Box relief?

An election is required but there is no set format for making the patent box election.  The election must be made in writing either in the computation accompanying the corporation tax return or via a separate formal written claim. The election needs to specify the first accounting period to which it applies.

UK patent box
7. Are there any time limits?

Your claim must be made within twelve months of the fixed filing deadline of the return for the first accounting period the company wishes to elect into the regime.

8. Can I change may mind?

Yes, however you may not then elect back into the regime for five years. This rule exists as a result to prevent abuse of the Patent Box regime.

9. Are the calculations complex?

There are two methodologies for computing the patent box profits. Firstly, a six-step profit apportionment approach or there’s an expenses streaming method. In some circumstances the streaming method is mandatory. It may be worthwhile modelling the tax relief under both methods to assess the most beneficial route to pursue.

10. Are there any other similar reliefs available?

Yes; the R&D enhanced relief scheme is certainly worth consideration if your company undertakes any R&D. The tax relief can be substantial depending on the level of qualifying R&D activities and, in some cases, a repayable tax credit may be claimable (ie a cash tax refund from HMRC!).

We can help you

Roffe Swayne have considerable experience in making successful R&D claims for our clients. Furthermore, we have a proven track record for agreeing claims with HMRC with no amendments. So please contact a member of our tax team if you are considering an R&D project.

For more information

If you would like to discuss UK Patent Box or R&D relief further, please contact us on:

01483 416232