Patent box tax regime ― overview

Produced by Tolley

The following Corporation Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Patent box tax regime ― overview
  • Introduction to the patent box regime
  • Changes to the patent box regime
  • R&D nexus
  • Cost sharing arrangements (CSA)
  • Qualifying intellectual property
  • Calculating eligible patent box profits
  • Calculating the patent box deduction
  • Patent box election
  • Timing
  • More...

Patent box tax regime ― overview

Introduction to the patent box regime

The aim of the patent box regime is to provide an incentive for companies to develop and retain patents and other qualifying intellectual property within the UK.

The regime is available for accounting periods commencing on or after 1 April 2013. It applies to companies within the charge to corporation tax that actively hold qualifying patents. Qualifying companies can elect for a reduced effective rate of corporation tax of 10% to apply to the income generated from the relevant patents (‘relevant IP profits’). The reduced rate of corporation tax is given effect by allowing a deduction to be made in the calculation of the company’s total taxable profits, rather than by actually applying a reduced rate of tax to the relevant IP profits. Patent and non-patent profits are therefore not separated and taxed at different rates in the corporation tax computation, although detailed calculations must be performed to identify the relevant IP profits themselves. The benefits provided by the patent box regime will be increasingly valuable given the announced increase in the UK corporation tax rate to 25% from 1 April 2023.

Non-qualifying profits generated by a company which has elected into the regime will continue to be taxed at the main rate of corporation tax.

Please refer to the Patent box ― qualifying companies guidance note for information on the relevant conditions. The regime applies equally to corporate partners, with some necessary modifications. It is not available to individuals.

The

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