The Patent Box allows companies to apply a lower 10% Corporation Tax rate on profits arising from patent exploitation. Since April 2013, companies can apply the lower Corporation Tax rate (on a phased basis) to profits attributable to patents and other qualifying intellectual property such as medicinal or botanic innovation rights.
Companies can use the Patent Box if they own or exclusively license-in patents granted by the:
- UK Intellectual Property Office
- European Patent Office
- The following countries in the European Economic Area: Austria, Bulgaria, Czech Republic, Denmark, Estonia, Finland, Germany, Hungary, Poland, Portugal, Romania, Slovakia, and Sweden.
The government has been considering making changes to the design of the UK Patent Box to comply with a new international framework for preferential tax regimes for intellectual property (IP) set out by the Organisation for Economic Co-operation and Development (OECD) to avoid profit shifting.
This will mean that the amount of profit from an IP asset which can qualify for the reduced rate of Corporation Tax available through the UK Patent Box will depend on the proportion of the asset’s development expenditure incurred by the company. The new measures will have effect for new entrants to the Patent Box on or after 1 July 2016, and also for some IP assets (e.g. patents) acquired on or after 2 January 2016.