Patent Box

Does your business profit from patented technologies? You may be able to reduce your Corporation Tax rate to only 10%.


What is Patent Box?

Patent Box is a tax incentive program that cuts corporation tax to 10% on profits earned from patented products or the use of patented technologies.

The program encourages companies to invest in research and development by supporting the commercialization of new technologies.

This tax rate reduction applies to 100% of a company’s worldwide earnings from eligible IP income. With corporate tax set to rise from 19% to 25% for businesses earning over £250,000 on April 1, 2023, utilizing Patent Box has become increasingly crucial for good tax planning.


Why Choose Us?

To make a successful Patent Box application, both technical and financial justification are necessary.

Our Patent Box department has the necessary expertise in both areas to prepare accurate and efficient claims. We will help identify specific revenue streams, evaluate each Intellectual Property right, consider the R&D involved, and guide you through the process of calculating final figures.

Our team of experts can handle the complex computations needed to determine qualifying profits for Patent Box tax relief, which were made even more complex with the improvements to the scheme in 2016. We recommend seeking expert counsel rather than going it alone. We offer a preliminary evaluation via booking a meeting with a member of our team. Consult with us to see how Patent Box can be a valuable tool for safeguarding your company’s future profits.


Qualifying for Patent Box

A business can take advantage of Patent Box if it earns profits from patents it owns or exclusively licenses and has invested in related “qualified development.”

To qualify, a UK-limited company making UK corporation tax payments must meet the following conditions:

  • Have a legitimate IP right, including approved patents from the UKIPO or EPO, patents recognized by some EU member states, and other European IP rights (SPCs, plant variety rights, and plant breeders’ rights)
  • Be the owner or sole licensee of the IP right
  • Be primarily responsible for generating the protected innovation or making significant contributions toward it, or have significant progress in developing the patented invention or dependent processes/products
  • Have an active role in managing its portfolio of qualified IP rights if satisfying the condition through another group member
  • Generate profits from the IP right, such as from the sale of patented goods


Calculating Tax Relief

To receive the relief, the company must make a formal election, which can be included in company tax computations and is valid until revoked.

The “relevant IP profits” eligible for Patent Box must be calculated through a 5-stage process:

  1. Determine pertinent IP profits using a “streaming” methodology
  2. Subtract a “routine profit” of a hypothetical 10% return on operational costs
  3. Subtract revenue from the company’s brand or marketing resources
  4. Reduce Patent Box benefits by multiplying by the R&D fraction for cases where the company hasn’t done all necessary R&D on its own
  5. The result is the amount that qualifies for the corporate tax rate reduction of 10%. Companies can choose to use a formulaic or streaming method and may choose to stream if it results in a more representative amount of earnings from Patent Box. The formulaic method no longer applies under the new regulations and relief is provided through a formula specified in the legislation, resulting in a deduction from the taxable profits of the business.


Our Process

Completing a Patent Box application can be a complex task, but at Bonham & Brook, we aim to make the process as smooth and stress-free as possible. Our team of tax specialists and technical experts will work closely with you to increase the chances of your application being accepted.

  1. Verifying Intellectual Property Together. We will locate and verify your current intellectual property (IP) as well as any ongoing or upcoming innovation projects.
  2. Evaluating Benefits. We will evaluate the benefits of making a Patent Box election and determine the most appropriate time frame for you.
  3. Documenting Your Claims.  While documenting the engineering justification, we will create a schedule of goods and services related to the qualifying patents and determine which of these may also qualify for the Patent Box scheme.
  4. Reaping the Rewards. We will explain the relationship between R&D spending, patents, and revenues, and the Patent Box deduction will be included in your year-end tax breakdown. Our tax analysis will provide an overall savings estimate, with the benefits provided by HMRC.


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