The UK Government is aiming to provide an attractive business environment for innovative companies by offering them an option to reduce their corporation tax bill.
The Patent Box allows companies to access a 10% effective tax rate on profits attributable to patents and certain other intellectual property, rather than paying tax rate of 20%.
Companies that qualify for the Patent Box will be able to enjoy an annual tax saving of up to £100,000 by 2017 on qualifying patent profits of up to the £ 1 million per annum small claims threshold.
The 10% rate applies to worldwide profits arising from UK and EU existing and new patents. The patents must be owned by the company, or the company must have an exclusive licence over the underlying patent.
You will be able to reduce your Corporation Tax liability if:
- Your company has developed a product which relies on a patented technology that you own,
- Your company is selling that product and recording the profits in a UK company,
- Your company is paying Corporation Tax because of those profits.
The Patent Box tax saving applies independently of the reliefs and credits available under R&D tax regime. Innovative companies will therefore be able to benefit under both R&D and Patent Box regimes if the requirements of each set of rules are met.
