Patent box

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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 intellectual property (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, do 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 introduced legislation in Finance Act 2012 which took effect from 1 April 2013. The full benefits of the patent box were phased in over four years.

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

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