The Patent Box regime reduces the rate of company tax on profits from patents and sales of patented products to just 10%.
The Patent Box regime is very generous, applying the 10% tax rate to worldwide profits arising from the exploitation of patents which have been granted by either the UK Intellectual Property Office or the European Patent Office. For this purpose, the definition of profits is very broad including sales of patented products or products incorporating patented items as well as licence fees or royalties.
In order to claim, the company must meet the development condition i.e. they must have created or made a significant contribution to the innovation.
The patent box regime gives further commercial justification for the costs of obtaining patents.
Clients often say that they don’t apply for them because they could not afford to defend them. However, they are worth applying for just because of the tax benefits.
For more information please contact Sara Crowther or Susan Pudge in our Cheltenham Office.