‘Patent Box’ is the government’s name for the new system of charging lower rates of tax on profits from patents. It applies to patents granted in the UK and Europe, including those granted before Patent Box is introduced. It does not cover other forms of IP such as trademarks and copyrights.
Who does it apply to?
Patent Box applies only to companies chargeable to corporation tax, and not to individuals, partnerships or LLPs.
What are the new, lower rates of tax on patent income?
The effective rate of tax in the financial year 2013/14 for companies paying corporation tax (CT) at the main rate is 15.2%. For companies paying corporation tax at the small profits rate the effective tax rate on patent income is 13.2%.
The rates are set to decrease each year down to 10% (main CT rate) and 8.7% (small profits CT rate) by 2017/18.
A full rates table is set out on our Patent Box fact sheet
What are the main conditions?
The company must own or licence-in a patent and have made a significant contribution to:
– An item protected by the patent or
– A product incorporating the item
What else do I need to know?
Further information about Patent Box is set out on our fact sheet including:
– How group companies are treated under the regime
– The sort of income that will attract the lower rates
– How Patent Box profits are calculated
All of the above is based on draft legislation which is subject to amendment. Please contact a Moore and Smalley LLP tax specialist for detailed advice on how to take advantage of this new opportunity.