Patent Box effectively provides a c.10% corporation tax rate for profits arising from patented technology, reduced from the headline rate of 25%.
Qualifying criteria
To benefit, companies essentially need:
- a filed patent application (UK, EU or equivalent)
- to perform development activities (R&D)
- to be generating profitable trading income from the invention
Patented products and processes can qualify and qualifying income is broadly defined, including revenues from product sales, license/royalty income, disposal proceeds and other sources.
Calculations
Claim calculations are formulaic and so whilst complicated in year 1, can typically be rolled forward for later years, minimising the administrative burden on the company.
The patent box benefit is given on the proportion of profit for tax purposes that relates to patented products/processes, and after deduction of a ‘routine’ profit element and any substantial value derived from brand and marketing assets.
Nexus
Aside from ‘grandfathered’ claims, most companies will now make claims under the new ‘Nexus’ rules. Whilst Nexus is a little more complicated, the good news is that smaller companies are unlikely to be adversely impacted. If Nexus does impact your claims, we can help you to understand and manage the position effectively.
Summary
If you are already making R&D claims (or could do so), have a patent filed/granted and are paying corporation tax, get in touch to find out how much patent box could save you.
