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The UK Patent Box
Tax relief on innovation
The UK Patent Box regime provides a lower effective corporate tax rate of 10% on profits attributable to UK or certain European patents.
The R&D regime and Patent Box regime work alongside each other to incentivise and support the full innovation lifecycle of a UK business.
How does the Patent Box work?
Who can benefit?
The Patent Box is available to all companies who:
- Hold or exclusively in-license a granted UK or European patent; and
- Meet the substance requirements of the regime – the development and active ownership conditions.
How is the benefit calculated?
The first step is to establish how a company’s QIPR maps to its income that falls into one of the following categories:
- product and bespoke spare parts sales,
- royalties, milestones and licence fees,
- patent sales,
- damages for infringement and other compensation payments,
- services income or income from patented processes
19% is the main rate of Corporation Tax
10% is the Patent Box tax rate
Further adjustments are required to determine the company’s profit attributable to its patents. This is the profit that is eligible for the 10% rate of tax.
How has the Patent Box regime changed recently?
Changes to the Patent Box regime were introduced from 1 July 2016 requiring a claimant to demonstrate a “nexus” between its R&D activities and tax benefit derived from the regime.
These changes require consideration of R&D expenditure alongside preparation of the Patent Box claim for a period. Grandfathering provisions for the previous regime are available in some cases until 30 June 2021.
Changes implemented from 1 July 2016. 'Nexus' or substance demonstrated by reference to an R&D fraction.
The fraction is cumulative from 1 July 2016.
Tracking and tracing the above costs can be undertaken as part of the R&D claims process.
Deloitte’s Gi³ Patent Box team
Deloitte’s Gi3 Patent Box team has extensive experience in supporting businesses to identify the availability of the Patent Box relief across a variety of industries, working alongside our colleagues in the R&D tax team.
Patent Box relief can be complex. As the UK’s market leading team in this area, Deloitte’s Patent Box team includes dedicated professionals with financial, patent and scientific backgrounds who can bring their insights on the applicability of the Patent Box relief to your business.
How Deloitte can help
Each claim process is bespoke to the claimant company, and can depend on many factors such as industry sector, size, resources and existing systems. We work with our clients to prepare their claims, and ease the burden of the claim preparation process, while implementing the most relevant methodology.
The benefits we offer include:
Technical teams
Our teams have worked with businesses since the inception of the Patent Box regime to prepare and support their Patent Box claims, giving us unrivalled technical know-how. Our team has worked with HMRC on the practical implementation of the changes to the Patent Box regime for UK businesses.
Deep technical insights
Our Patent Box tax professionals work with patent attorneys, scientists and software specialists, enabling us to better understand your business and effectively work with your professionals. Our team is experienced in many sectors such as: biotechnology, pharmaceutical, manufacturing, petrochemical, aerospace, chemical, software (including FinTech) and utilities.
IP Advisory
Our Patent Box team works with Deloitte's market leading IP Advisory team who advises on IP strategy, IP management and provides transactional services across a variety of market and technology sectors. This collaboration enables us to provide a wide range of services when advising our clients on optimising their patent portfolio and capitalisation of intangible assets.
Intellectual property
Our Patent Box Team also works with Deloitte’s market leading IP team whose clients are some of the world’s most innovative companies and handle business critical IP issues in rapidly digitalising industries such as financial services, software and services, retail, media and entertainment. The team can will help you understand how the IP ecosystem works, how to enforce your rights and how IP can be used to drive your business forward.
Technology enabled
Our work leverages technology, enabling efficient claims preparation processes.
Global reach
The international focus of our Gi³ practice helps businesses identify incentive opportunities on a global basis.
Let’s talk
Get in touch to meet our specialist team and discuss your Patent Box situation. Our global view, expert team and close links with the R&D tax team may uncover significant areas where we can add value, efficiency, accuracy and robustness to your process.
