Patent Box: What is it & how can you benefit?

November 2, 2023

In an effort to promote innovation and incentivise research and development, many governments around the world have introduced various tax incentives. In the United Kingdom, the Patent Box scheme is one such initiative designed to encourage businesses to invest in innovation and protect their intellectual property. Here we delve into the details of the UK Patent Box scheme, explaining how it works and its potential benefits for qualifying companies.


What is the UK Patent Box Scheme?

The UK Patent Box scheme is a tax incentive introduced by the UK government to encourage businesses to develop and retain intellectual property within the country. It enables eligible companies to apply a reduced rate of corporation tax to profits derived from patented innovations and certain other intellectual property rights.


Eligibility Criteria

To qualify for the Patent Box scheme, a company must meet the following criteria:

  1. Be liable for Corporation Tax in the UK.
  2. Hold a qualifying patent or exclusive rights to a patented product or process.
  3. Have undertaken qualifying development work on the patent or product.


Benefits of the Patent Box Scheme

Participating in the Patent Box scheme can yield several significant advantages for qualifying businesses:

Reduced Corporation Tax

One of the primary benefits of the scheme is a reduced rate of corporation tax on eligible profits – currently 10%. This rate provides a substantial tax incentive, as the corporation tax rate is 25% for businesses earning over £250,000.

Increased Innovation

The scheme encourages businesses to invest in research and development by supporting the commercialisation of new technologies. This not only benefits the individual business but can also contribute to the overall economic growth and technological advancement of the United Kingdom.

Attraction for Investment

The availability of the Patent Box scheme can make the UK more appealing to companies looking to invest in research and development activities. This could lead to increased foreign direct investment, benefiting the UK economy and job market.

Competitive Advantage

Qualifying businesses can gain a competitive advantage by protecting their intellectual property through patents. This scheme rewards companies for their innovative efforts, helping them secure market share and potentially grow faster.


How to Apply for the Patent Box Scheme

The process of applying for the Patent Box scheme involves several steps:

  1. Ensure eligibility: Make sure your company meets the eligibility criteria, holds a qualifying patent, and has undertaken qualifying development work.
  2. Calculate eligible profits: Determine the portion of your profits that qualify for the reduced tax rate under the scheme.
  3. Claim benefits: Include the eligible profits and claim the reduced rate when filing your Corporation Tax return.


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 specific conditions, including having a legitimate IP right and being the owner or sole licensee of the IP right.


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, known as “heads”.


Is there any more to it?

Another area that businesses can explore is rapid relief by harvesting IP and submitting a fast-tracked patent application, which unlocks the corporation tax savings earlier. This method increases cash flow earlier, giving the company more money to invest in the business.


How can my business apply for Patent Box?

By getting in touch with our team today! We have an experienced team who will guide you through the process to maximise your potential tax relief. Call us on 020 3523 9125 or email

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