What is the Patent Box?
The UK Patent Box offers a lucrative tax incentive for innovative companies. These companies only have to pay a tax rate of 10% on their Patent Box profits, which is significantly lower than the current corporation tax rate of 19%. This incentive works in conjunction with other valuable tax incentives for Research and Development (R&D). As a result, companies can potentially receive tax benefits throughout the entire innovation process, from development costs to generating profits from patented technology.
What intellectual property does Patent Box apply to?
The Patent Box offers a 10% tax rate for certain Intellectual Property (IP) rights, including both existing and new patents. Additionally, if a company acquires patent rights from a third party and further develops the IP or incorporates it into a product, it may still qualify for the 10% tax rate. Similarly, if a company licenses in patent rights with national-level exclusivity, it may also be eligible for the Patent Box.
What profits are eligible for Patent Box?
The tax incentive acknowledges that the process of patenting takes time. The Patent Box applies only to patents that have already been granted, but there is a “catch-up” mechanism. Profits made from the patented technology during the “patent pending” period, up to six years, can be included in the Patent Box claim for the year when the patent is granted. It’s important to seek specific advice in this situation, as there are many factors to consider. Patent Box profits can include those from sales of products protected by qualifying patents or rights, products that incorporate one or more patented items (including wholesale, not just those relating to the patented item), items designed to be incorporated into patents, and products made using a patented process, even if they don’t incorporate a patented item themselves. The notional royalty is the amount that a company would expect to pay as a license fee to an unrelated third party if it did not possess the rights to the process.
How can Capti Innovation help?
If your company may be eligible for the Patent Box, it’s wise to seek expert tax guidance as soon as possible to explore eligibility and plan accordingly. At Capti Innovation, we specialize in innovation and technology grant funding, and we can help support your intellectual property (IP). We can introduce you to our partners who specialize in Patents and IP, so you can receive the assistance you need.