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 regime
  • Reduced rate of corporation tax
  • Qualifying intellectual property
  • Calculating the patent box profits
  • Changes to the patent box calculations
  • Patent box election

Introduction to the 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 as part of the Government’s growth agenda. Finance Act 2012 originally introduced the legislation governing the regime and HMRC’s guidance appears in HMRC’s Corporate Intangibles Research and Development Manual at CIRD200000 onwards.

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 rate of corporation tax to apply to the income generated from the relevant patents. 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 patent profits. Patent and non-patent profits are therefore not separated and taxed at different rates in the corporation tax computation. The patent box deduction gives the effect that patent box profits are taxed at a reduced rate.

Please refer to the Patent box ― qualifying companies guidance note for information on the qualifying company conditions. The regime applies equally to corporate partners, with some necessary modifications. See CTA 2010, s 357GB. It is not available to individuals.

The term ‘accounting period’ within the patent box legislation refers to a corporation tax accounting period, rather than a period of account for which financial statements are prep

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