Patent box

The patent box is an elective regime that provides for an effective 10% rate of corporation tax on worldwide profits attributable to qualifying patents and a few similar intellectual property (IP) rights.

Effectively, the patent box rate applies to a proportion of the company's profits derived from:

1. •

   licensing or selling qualifying IP rights

2. •

   selling products incorporating a patented invention

3. •

   using a patented invention elsewhere in the course of a company's trade, eg providing services or renting a patented product, or

4. •

   compensation received for infringement of a qualifying IP right

Profits derived from a company's routine manufacturing or development functions, or marketing activities, do not benefit from the patent box.

Patent boxes have been implemented in a number of countries, particularly in Europe, for some years. The UK Government first consulted on the introduction of a UK patent box in 2010, and introduced legislation in Finance Act 2012 which took effect from 1 April 2013. The full benefits of the patent box were phased in over four years.

The UK patent box is a relief from corporation tax and so only available to qualifying