What is the Patent Box?
The UK Patent Box regime is a generous tax incentive. It effectively applies a reduced rate of corporation tax on profits arising from patents and patented products, providing that the claimant company has been involved in the development of the patented technology or products and services based on it. Innovative companies will pay tax on their Patent Box profits at just 10% compared to the current rate of company tax of 19%.
Broadly, the 10% tax rate applies to worldwide profits arising from the exploitation of UK patents, patents granted by the European Patent Office and certain EU member states, or from an exclusive licence over such patent rights.
The Patent Box complements existing, valuable tax incentives for Research and Development (R&D). In principle, therefore, tax incentives are now potentially available for the whole of the innovation lifecycle; from costs of development through to generation of profits from the resultant improved technology, if it is patented.