The UK Government introduced a “Patent Box” tax relief scheme in April 2013 that enables companies to apply a lower rate of corporation tax to profits earned from patents.
The relief will be phased in over a period of time, starting from 60% relief for tax year 2013/2014 and incrementing by 10% each year, the full relief being available from the 2017/2018 tax year. Once the full relief is in place the lower rate of Corporation Tax that is payable on profits earned from patents will be 10%.
Relief is open to companies who own or exclusively license the relevant patents, and must have been involved in the development of them, for example by creating, or significantly contributing to the creation of, the patented invention; or performing a significant amount of activity to develop the patented invention, any product incorporating the patented invention, or any process incorporating the patented invention.
All granted UK and European patents qualify for the Patent Box scheme regardless of when they were granted, as do patents granted in some other selected countries in the European Economic Area.
Types of income that qualify may arise from selling patented products, licensing out patent rights, selling patented rights, income arising from infringement of your patent rights – e.g. damages awarded, income from use of a patented manufacturing process, or income from provision of a service reliant on a patented tool.
In order to maximise relief we recommend that you review your existing portfolio to make sure your patents cover your products; and that you consider accelerating existing patent applications as relief is only based on granted patents. It may also be prudent to consider filing new or additional applications in order to strategically adapt to the new regime.