Patent BoxHow it works and how to get started

The UK Patent Box allows qualifying businesses to pay a lower Corporation Tax rate of 10% on profits arising from patented products or services.

HMRC’s Patent Box Scheme enables qualifying companies to pay a lower effective Corporation Tax rate of 10% of profits from patented products or processes. 

Patent Box: At a glance

Step 1. Confirm Your Eligibility

Check if your company and patents qualify for the scheme. This involves factors such as patent type and income source.

Step 2. Identify Relevant Profits

Isolate the profits specifically linked to your qualifying patents. This separates them from your overall company income.

Step 3. Calculate Patent Benefit

This involves removing non-patent related profits such as routine business returns. This step requires detailed calculations that are best handled by a tax professional.

Does your business qualify?

Before doing anything else, it is essential to understand if you qualify. Doing so could save you time now and prevent issues with HMRC later.

 

  • Has your patent been granted by the UK Intellectual Property Office (IPO) or European Patent Office (‘EPO’)?*

  • Was your company involved in the development of the patent?

  • Did your company (or a group company) conduct a significant amount of the R&D on the patented product or process?

If your answer to these questions is “yes”, then it is worth your time to check your eligibility if you haven’t already.

 

*Patents granted by the National IPO of a selected few European countries may also qualify.

Patent Box Resources & Guides

What is Patent Income?

10 Years of Patent Box

Patent Box for SMEs

The Modified Nexus approach to Patent Box

What is the Patent Box?

Patent Box is a complex scheme, so it's important to gather as much information as you can before proceeding

Patent Box FAQs

  • How much is the reduced tax rate under Patent Box?

    Patent Box allows eligible companies to apply a lower rate of Corporation Tax, currently 10%, to the profits derived from patented income.

  • Which companies qualify for Patent Box?

    The Patent Box scheme is for businesses that generate profit from patented products or processes. This means that a business must meet strict qualifying criteria to be able to make a claim.

    • The company must be subject to Corporation Tax
    • It must own or exclusively licence qualifying IP
    • The company must hold a qualifying patent from the UK Intellectual Property Office or the European Patent Office
    • The company must prove that a significant proportion of the profits arising from its patented products or services are a result of its own R&D activities.
    • The company must keep records and provide HMRC with information about the patents and the profits they help generate.

    Further conditions will also need to be considered and should be explored in detail with a Patent Box specialist.

  • Can loss-making companies benefit from Patent Box?

    If a company is currently loss-making, it can still benefit from the Patent Box scheme if it expects to generate profits in the future. Sometimes a company might even make a Patent Box profit but an overall Tax loss, the effect would be to create a larger trading loss that could be relieved against future profits or carried back.

  • What is the qualifying IP for Patent Box?

    Qualifying IP includes patents granted by the UK Intellectual Property Office (IPO), by the European Patent Office and by certain, but not all, European countries.

  • How do you claim under Patent Box?

    Your company must formally opt-in to benefit from the Patent Box scheme’s lower corporation tax rate on qualifying profits.

    You must inform HMRC of your intention to use the Patent Box within two years after the end of the accounting period when the profits were generated. There’s no specific form required. You can indicate your election within your company tax return calculations or submit a separate written notification.

  • Is Patent Box available to SMEs?

    Yes, the Patent Box scheme is available to all qualifying UK companies, including SMEs (Small and Medium-sized Enterprises).

  • How often is the Patent Box benefit available?

    Once a company has established eligibility, the relief is available every year in which the company owns and generates income from qualifying IP. Bearing in mind patents have a life of 20 years, the total relief can be extremely valuable.

  • Can you combine Patent Box with R&D Tax Credits?

    R&D Tax Credits and Patent Box Tax Relief are two separate incentives, but they can often be combined by innovative companies, providing an exceptional tax saving.

    We strongly recommend that qualifying companies take advantage of both these incentives if they can – but how does this work exactly?

    1. A company is investing in an innovative new product, one that aimed to achieve an appreciable advance in science or technology in its development – this project may qualify for R&D Tax Relief.
    2. Were this new product to also contain patented technology, the organisation would be able to make further tax savings on profits derived from it.