The 'Patent Box' regime comes into force in April 2013. It entitles a company to apply a lower rate of UK corporation tax on worldwide profits earned from its patents in the Patent Box.

The lower rate will be phased in from April 2013, and will be as low as 10% from April 2017.

To include a patent in the Patent Box, the UK taxpayer must:

  • own or exclusively licence-in the qualifying patent; and
  • have been involved in developing the patents - that is creating (or significantly contributing to) either a patented invention or its development, or any product or process incorporating the patented invention.

A qualifying patent is one that has been granted (not merely applied for). It includes all UK and European patents as well as those granted by Austria, Bulgaria, Czech Republic, Denmark, Estonia, Finland, Germany, Hungary, Poland, Portugal, Romania, Slovakia and Sweden. Once granted, however, profits from the period from application for the patent qualify for the Patent Box (except profits earned prior to April 2013).

The lower tax rate applies to qualifying income. This includes income earned from selling or licensing of patent rights, or arising from patent infringement; selling patented products; and income from use of a patented process or from services reliant on a patented tool.