The Patent Box – Tax Incentives for UK Innovations

The Patent Box – Tax Incentives for UK Innovations
August 9, 2014 sandersons

On 1st April 2013 the UK government introduced the Patent Box scheme with the aim of encouraging British companies to invest in innovation to stimulate the economy and strengthen manufacturing industry, and to make the UK more attractive for international companies to base their R&D here.

What is Patent Box?

Patent Box allows companies to apply a lower rate of Corporation Tax to profits earned from their patents. The relief is being phased in from April 2013 with the full benefit of 10% Corporation Tax being available from April 2017.

To qualify for Patent Box a company must have been involved with the development of the patent and must own or exclusively license them.

Qualifying Patents

All granted UK and European patents qualify for Patent Box regardless of when they were granted, as well as patents from the following countries in the European Economic Area: Austria, Estonia, Hungary, Romania, Bulgaria, Finland, Poland, Slovakia, Czech Republic, Germany, Portugal, Sweden, Denmark

Qualifying Income

To qualify, income can arise from a number of sources including:

  • Selling patented products
  • Licensing out patent rights
  • Selling patented rights
  • Income arising from infringement of your patent rights – e.g. damages awarded
  • Income from use of a patented manufacturing process
  • Income from provision of a service reliant on a patented tool

You cannot qualify for Patent Box on the basis of a patent application but once the patent has been granted you can claim for profits that have been generated up to 6 years prior to grant. However, only profits arising after April 2013 will qualify.

As with all IP, a granted Patent is an asset for the company and tax breaks associated with it can only be beneficial.


“Having a granted Patent is a prerequisite for anyone wishing to take advantage of the Patent Box scheme. However, potential users of the scheme need to bear in mind that a patent application must be filed before any public disclosure of the invention takes place. You cannot wait until you are sure you have a commercially successful product before deciding to patent it, in order to get the Patent Box tax breaks. So, SMEs will need to be pro-active in determining at an early stage in product development process, which inventions to patent.”

Jerry Walder – Partner, Sandersons