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Patent Box – Tax relief for Companies with rights over registered patents

by Tom Reardon

Patent box is a valuable corporation tax relief available to certain companies holding registered patents or an exclusive licence in respect of such patents.

The aim of the relief is to provide an incentive for companies to retain and commercialise existing patents, and to develop new innovative patented products or processes.

The relief enables profits arising from patents to be taxed at an effective corporation tax rate of 10% (rather than the main rate which is currently 25% or 19% for companies with taxable profits under a certain threshold) by providing an additional deduction in the corporation tax computations.

The calculation of the patent box deduction is complex and requires detailed record keeping throughout the relevant periods to be able to stream profits relevant to each patent.

There are also strict deadlines in respect of electing into the patent box regime, and making a claim for the patent box deduction.

The timing of electing into the Patent Box regime requires careful consideration. For example, if a company elects into the regime and the IP is generating losses rather than profits, this can result in an IP loss which then has to be offset against future IP profits, before any patent box relief can be claimed. In other words, it can delay the benefit of the election.

Rickard Luckin can assist with establishing a Company’s eligibility, calculating the patent box deduction and making the relevant claims and elections.

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