Patent box introduction
Patent box introduction

The following IP guidance note provides comprehensive and up to date legal information covering:

  • Patent box introduction
  • Qualifying IP rights
  • Development condition
  • Qualifying companies
  • Calculating the relief—standard calculation
  • Alternative calculation—the streaming calculation (grandfathered and new rules)
  • How the relief is given
  • Phasing in patent box relief
  • Relevant IP losses

As of exit day (31 January 2020) the UK is no longer an EU Member State. However, in accordance with the Withdrawal Agreement, the UK has entered an implementation period, during which it continues to be subject to EU law. This has an impact on this Practice Note. For further guidance, see Practice Note: Brexit—IP rights.

The patent box is an elective regime that provides for an effective 10% rate of corporation tax on worldwide profits attributable to qualifying patents and a few similar IP rights.

Effectively, the patent box rate applies to a proportion of the company's profits derived from:

  1. licensing or selling qualifying IP rights

  2. selling products incorporating a patented invention

  3. using a patented invention elsewhere in the course of a company's trade, eg providing services or renting a patented product, or

  4. compensation received for infringement of a qualifying IP right

Profits derived from a company's routine manufacturing or development functions, or marketing activities, will not benefit from the patent box.

Patent boxes have been implemented in a number of countries, particularly in Europe, for some years. The UK government first consulted on the introduction of a UK patent box in 2010, and has introduced legislation in the Finance Act 2012 which took effect from 1 April 2013.

The UK patent box is a relief from corporation tax and so only available to