Patent Box Tax Relief

Patent Box Tax Relief Explained

What is the patent box scheme?

The patent box tax relief scheme is a government IP incentive initially introduced in 2013. It encourages companies to generate, commercialise and keep IP in the UK. It does this by reducing qualifying corporation tax liability to 10%. This could be 9% from the normal 25%. 
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It applies to those who own or licence a patent from the allowable patent offices, the UK Intellectual Property Office, the European Patent Office or certain countries within the European Economic Area. As well as similar from of IP like certain other medicinal or botanic innovation right.
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It was estimated that £1.46 billion was claimed in 2022/23, however only a small amount of companies are claiming this form of tax relief with less than 10% of this figure is claimed by SME’s.

Who qualifies for the Patent Box Scheme?

To qualify for the patent box there is a list of requirements:

• Be a UK limited company
• Be subject to corporation tax
• Own or licence a patent or Similar IP – You must own or licence a patent that is registered in UK Intellectual Property Office, the European Patent Office or certain countries within the European Economic Area
• To have performed development on this IP (R&D) – If you created and own the patent then this is the IP development you undertook to have the patent, if you are licensing a patent you have to have the rights to develop upon the initial IP
• To be generating profit from this IP – You only get the corporation tax reduction on the profits related to the IP so to benefit you must be making profit from this IP