Patent Box

The Patent Box is a tax relief which was introduced by the UK government in April 2013 which offers companies reduced tax rates on profits from products and services covered by patents, in order to recognise innovation in business.

How we can help

  • We can review current IP portfolios and map existing products to qualifying IP rights to help assess potential Patent Box benefits.
  • We can assess whether there are any gaps in an existing IP portfolio and work to identify any undisclosed IP that may be protected in order to gain Patent Box benefits for products not currently covered by a qualifying IP right.
  • We can work with technical teams and finance teams to optimise R&D investment to capture IP that can be protected by qualifying IP rights and which covers products for which Patent Box benefits meet any threshold cost-benefit measure.
  • We can assist in providing the required patent-product maps and legal opinions required for a successful Patent Box claim.
  • We can assist in resolving any complicated legal issues that may hold up your Patent Box claim.
  • We can advise on a suitable corporate structure to help maximise the potential Patent Box benefits. 

How does it work?

Initially the Patent Box reduced the rate of Corporation Tax for a portion of the patent profits to 14% for the 2013 tax year. The rate was then reduced by a further 1% each year to the current rate of 10% (as of on 1 April 2017).

The exact calculations to determine the reduction in tax can be complex. In essence, to calculate Patent Box reduction in corporation tax, accountants calculate “patent related” profit, which is the profit relating to products or services covered by a granted patent in a qualifying jurisdiction. From this “patent related” profit, they deduct a routine or expected profit (i.e. if no patents existed) and then deduct the brand value (i.e. any profit attributable to your brand alone). This will result in an amount on which only a reduced corporation tax rate is payable. The government’s intention is that, as of 2017, non-“patent related” profit is taxed at 20% while “patent related” profit is taxed at 10%.

How do I qualify?

To qualify for Patent Box a company must have made a significant contribution to either the creation or development of the patented invention or a product incorporating the patented invention. The patent must have been granted by the European Patent Office (EPO), UK Intellectual Property Office (UKIPO), or one of 13 EU states.

Companies will also qualify if the patent has been in-licensed on an exclusive basis. The Patent Box also incorporates patents which are pending, with the benefits accumulating for up to six years until the year of grant.

 


Recent changes

The UK and German Governments have jointly announced that they have reached agreement on a proposal regarding the treatment of IP regimes. This proposal will then be put forward to other members of the OECD’s Forum on Harmful Tax Practices when they meet.

HM Treasury has advised that the UK Government would consult with businesses on the detailed proposals before implementing any changes.

The main changes with the new proposal are:

  • The adoption of a “modified Nexus approach” which would mean R&D activity has to take place in the UK in order for the company to receive the maximum benefits of the regime. The proposal includes a concession allowing up to 30% of R&D to be outsourced to related parties (there remains no restriction on outsourcing to 3rd parties).
  • Grandfathering rules - the current Patent Box regime will be open to new IP until 30 June 2016, and will continue to operate until 2021, (an election into the current regime can be made at any point for periods up to 2021 and this will apply to pre-June 2016 IP, the precise definition of which is to be agreed.)
  • A new regime incorporating the “modified Nexus approach” will commence in 2016 with the current and new regimes running in parallel until June 2021.
  • The proposal is subject to reaching agreement on suitable transitional arrangements from the current to the new regime. An important element of this is agreeing suitable tracking and tracing rules under the “modified Nexus approach” to avoid disproportionate complexity and compliance burdens for business requiring R&D expenditure to be tracked for up to 20 years or more. These rules will need to be agreed with the other OECD members by mid-2015, in order to comply with the BEPS timetable.

The proposal would apply to all IP regimes, not just the UK Patent Box. We understand that the type of IP that can qualify will be limited so that only patents and similar IP, as is the case with the UK Patent Box, will qualify. The proposal would need to be accepted by the members of the OECD Forum on Harmful Tax Practices in order for it to be taken forward. Further discussions regarding the detailed rules, and how they will be implemented, are then expected to take place.

Meet the team Make an enquiry

The Patent Box is a tax relief which was introduced by the UK government in April 2013 which offers companies reduced tax rates on profits from products and services covered by patents 

Meet the
team 

Harvey Adams
Partner
Peter Arch
Managing Associate
Margaret Arnott
Partner
Anthony Ball
Associate
Nadège Beynon
Technical Assistant
Catherine Booth
Partner
Edd Cavanna
Associate
Michael Charlton
Technical Assistant
Jane Clark
Partner
Laura Clews
Associate
Douglas Cole
Managing Associate
Clare Collins
Technical Assistant
Paul Cozens
Partner
Olivia Creemer
Associate
Charlie Dempster
Associate
Rosalind Drywood
Managing Associate
Siobhan Durran
Technical Assistant
Alex Elder
Technical Assistant
Jane Evenson
Of Counsel
Samuel Flahive
Trade Mark Assistant
Thomas Fraser
Technical Assistant
Stephen Garner
Partner
Peter Garratt
Partner
Bethany Gibbs
Associate
Sam Giles
Technical Assistant
Daniel Goldberg
Technical Assistant
Lauren Gregory
Associate
Anna Gregson
Partner
Philippa Griffin
Partner
Christopher Hamer
Partner
James Hamp
Technical Assistant
Bethany Harriss
Technical Assistant
Robert Hawley
Partner
Annabel Hector
Of Counsel
Christopher Hirsz
Of Counsel
David Hobson
Managing Associate
Dean Houston
Technical Assistant
Peter Humby
Technical Assistant
Richard Jaszek
Managing Associate
Gary Johnston
Partner
Ilya Kazi
Partner
Miranda Kent
Associate
Dani Kramer
Partner
Ekaterina Langford
Associate
Sean Leach
Partner
Lianne Leith
Associate
Alan MacDougall
Partner
Martin MacLean
Partner
Matthew Maitland
Managing Associate
Andrea McShane
Associate
David Miller
Partner
Svilen Mirtchev
Associate
Samantha Moodie
Associate
Dylan Morgan
Technical Assistant
Matthew Morton
Associate
Juliana Murray
Technical Assistant
Lionel Newton
Technical Assistant
Abigail Nicholls
Litigation Associate
Amy Nick
Technical Assistant
Oliver Parish
Technical Assistant
James Pitchford
Partner
Monika Rai
Partner
Daniel Ramos
Trade Mark Assistant
Juliet Redhouse
Managing Associate
Joanna Rowley
Technical Assistant
Toby Simpson
Partner
Jeremy Smith
Partner
Thomas Smith
Associate
Graham Spenceley
Managing Associate
Andrew Spurr
Managing Associate
Michael Stott
Partner
Norbert Szalai
Associate
Max Thoma
Associate
Craig Titmus
Managing Associate
Aymeric Vienne
Managing Associate
Caroline Warren
Partner
Laura West
Managing Associate
Andrew White
Managing Associate
James Wilding
Partner
Annabel Williams
Associate