Patent Box Tax Relief
Reduce your corporation tax rate to 10% on profits from qualifying patented innovations and intellectual property streams through the UK Patent Box regime.
What is Patent Box Tax Relief?
The Patent Box is a UK corporation tax relief scheme that allows companies to apply a reduced corporation tax rate of 10% on profits derived from qualifying patented inventions and intellectual property. Introduced in 2013, the Patent Box regime provides significant tax savings for innovative companies that develop, own, or exclusively license qualifying patents.
For companies paying the main corporation tax rate of 25% (from April 2023), Patent Box relief can reduce the effective tax rate on qualifying profits to just 10%, representing a 60% reduction in corporation tax. This substantial tax saving makes Patent Box one of the most valuable tax reliefs available to innovative UK businesses.
Patent Box Eligibility Requirements
To qualify for Patent Box tax relief, companies must meet specific eligibility criteria:
- Qualifying IP Rights: The company must own or exclusively license patents granted by the UK Intellectual Property Office (UKIPO), the European Patent Office (EPO), or certain other qualifying patent offices
- Active Development: The company must have actively developed the patented invention or performed significant development work on products or processes incorporating the patent
- Qualifying Income: Profits must be derived from qualifying income streams, including sales of patented products, licensing income, and proceeds from the sale of patent rights
- Nexus Requirement: The company must meet the "nexus fraction" requirement, ensuring that the development activity and ownership of the IP remain substantially within the company or qualifying group
Patent Box Calculation and Tax Savings
Patent Box relief is calculated using a formula that determines the proportion of profits eligible for the reduced 10% tax rate. The calculation involves:
- Relevant IP Profits: Identifying profits directly attributable to qualifying IP rights
- Routine Return Deduction: Deducting a notional routine return (typically 10% of certain costs) to reflect the return a company would expect without the IP
- Marketing Assets Return Deduction: Adjusting for profits attributable to marketing assets rather than the patent itself
- Nexus Fraction: Applying the nexus fraction to ensure only profits from qualifying development activities benefit from the relief
For a company with £1 million of qualifying patent profits and a main corporation tax rate of 25%, Patent Box relief could reduce the tax liability from £250,000 to £100,000, saving £150,000 in corporation tax annually.
Our Patent Box Services
Eligibility Assessment
We conduct comprehensive reviews of your intellectual property portfolio to determine Patent Box eligibility, including:
- Review of existing patents and patent applications to identify qualifying IP rights
- Assessment of development activities to confirm active development requirements
- Analysis of income streams to identify qualifying income sources
- Nexus fraction calculation to ensure compliance with ownership and development requirements
Patent Box Calculations and Optimisation
Our tax specialists prepare detailed Patent Box calculations to maximise your tax relief, including:
- Accurate calculation of relevant IP profits from qualifying income streams
- Optimisation of routine return and marketing assets return deductions
- Strategic structuring of IP ownership and licensing arrangements to maximise relief
- Coordination with R&D tax credits to ensure both reliefs are claimed where applicable
Patent Box Compliance and HMRC Reporting
We ensure ongoing compliance with Patent Box requirements, including:
- Preparation of Patent Box computations for inclusion in corporation tax returns
- Maintenance of detailed records to support Patent Box claims
- Handling of HMRC enquiries and compliance reviews
- Ongoing monitoring of eligibility as your business and IP portfolio evolves
Strategic IP Structuring
We provide strategic advice on IP structuring to maximise Patent Box benefits:
- Group structure planning to optimise Patent Box relief across group companies
- Licensing arrangements to ensure exclusive licensing requirements are met
- IP acquisition strategies to maximise qualifying IP rights
- Integration with other tax reliefs, including R&D tax credits and capital allowances
Why Choose Acumon for Patent Box Services
Specialist Tax Expertise
Our tax team includes specialists with extensive experience in Patent Box calculations and HMRC compliance, ensuring accurate claims and maximum relief.
Integrated IP and Tax Advice
We combine tax expertise with understanding of IP law and patent requirements, providing comprehensive advice on both eligibility and optimisation.
Proactive Compliance
We maintain detailed records and documentation to support Patent Box claims, reducing the risk of HMRC challenges and ensuring ongoing eligibility.
Strategic Planning
We work with you to structure your IP arrangements strategically, maximising Patent Box relief while ensuring compliance with all requirements.
Patent Box and R&D Tax Credits
Companies can claim both Patent Box relief and R&D tax credits, providing substantial tax savings for innovative businesses. We coordinate both reliefs to ensure maximum benefit:
- R&D tax credits provide immediate cash flow benefits through enhanced deductions or payable credits
- Patent Box relief provides long-term tax savings on profits from commercialised innovations
- Strategic timing of claims can optimise the interaction between both reliefs
Next Steps
If your company owns or licenses patents, Patent Box relief could significantly reduce your corporation tax liability. Contact our team to discuss your eligibility and discover how we can help you maximise Patent Box tax savings while ensuring full compliance with HMRC requirements.
Frequently Asked Questions
The Patent Box allows companies to apply a reduced corporation tax rate of 10% on profits derived from qualifying patented inventions, compared to the main corporation tax rate of 25% (from April 2023). This represents a 60% reduction in corporation tax on qualifying profits.
Patents granted by the UK Intellectual Property Office (UKIPO), the European Patent Office (EPO), or certain other qualifying patent offices can qualify for Patent Box relief. The company must own or exclusively license the patent and have actively developed the invention or performed significant development work.
Yes, companies can claim both Patent Box relief and R&D tax credits. R&D tax credits provide immediate benefits through enhanced deductions, while Patent Box provides long-term tax savings on profits from commercialised innovations. We can help coordinate both reliefs to maximise your tax savings.
Patent Box relief is calculated by identifying relevant IP profits, deducting routine returns and marketing assets returns, and applying the nexus fraction. The resulting profit is then taxed at the reduced 10% rate instead of the main corporation tax rate.
Companies must maintain detailed records of qualifying IP rights, development activities, income streams, and calculations to support Patent Box claims. We help establish robust record-keeping systems to ensure ongoing compliance and support HMRC enquiries.
Next steps
Discover how Patent Box tax relief could reduce your corporation tax liability. Our specialist team can assess your eligibility, calculate potential savings, and ensure full compliance with HMRC requirements.