What is Patent Box tax relief? Part 1
Patent Box, sometimes referred to as Patent Box Relief, or Patent Box Tax Relief, enables UK companies to apply a lower rate of Corporation Tax to profits earned after 1 April 2013 from its patented inventions.¹
The lower rate of Corporation Tax that can be applied is 10%, rather than the Corporation tax rates of 19% or more (depending on how much profit the company makes).²
Are you eligible for Patent Box?
HM Revenue & Customs’ guidance on Patent Box specifies that you can only use the Patent Box if your company:
- is liable to Corporation Tax;
- makes a profit from exploiting patented inventions;
- owns or has exclusively licenced-in the patents; and
- has undertaken qualifying development on the patents.¹
Further details regarding Patent Box eligibility can be found – Use the Patent Box to reduce your Corporation Tax on profits – GOV.UK. We typically recommend discussing Patent Box with your accountant.
Is Patent Box worth it?
HM Revenue & Customs estimates that for the tax year 2022 to 2023, around 1,600 companies elected into Patent Box. HM Revenue & Customs also estimates that around £1.5 billion of Patent Box tax relief was claimed in the tax year 2022 to 2023 .³
Who is using Patent Box?
Patent Box is being claimed by companies of all sizes. Of the 1,600 companies elected into Patent Box, 25% are classified as large, 27% medium-sized, 26% small and 20% micro.
However, the distribution between sectors does not appear to be as evenly distributed as the company sizes. Manufacturing companies are estimated as being 61% of the 1,600 companies elected into Patent Box.
Perhaps surprisingly, i) Agriculture, Forestry and Fishing, ii) Construction, iii) Transportation and Storage, and iv) Information and Communication industries are each estimated as accounting for less than 5% of the 1,600 companies.³
How can we help?
As specialists in patent drafting and prosecution, we can prepare and prosecute patent applications for your inventions that can enable you to take of advantage of Patent Box.
Please get in touch with Thomas Measures – Appleyard Lees or Paul Beynon – Appleyard Lees if you would like to discuss whether your organisation could make use of Patent Box.
References:
¹ Use the Patent Box to reduce your Corporation Tax on profits – GOV.UK
