Effective as of 1 April 2013, income derived from patents is entitled to a special reduction in corporation tax. In the government's latest Budget it was announced that UK companies will benefit from lower corporation tax rates as the economy recovers - the 23% rate for the 2013-2014 tax year will fall to 21% from April 2014 and then to 20% from April 2015. This will bring the main rate of corporation tax down to the current "small profits" rate to create a simplified regime for all - and the lowest corporate tax rate in the whole G20 group. In addition, electing into the Patent Box will see the corporation tax rate cut to just 10% for qualifying profits that can be linked to a UK or European patent.
We have already seen clients building a patent box factor into their regular IP portfolio reviews. The decision of whether to proceed with a patent application for different aspects of a company's new technology may now include an element of tax strategy as well as the usual commercial rationale.
When interviewed for a recent Sunday Times article, Dehns' client Chris Whiteley from Oxford Plastics commented on the potential of the scheme: "It is particularly beneficial for us, as all products made from a single patented process can be included in the Patent Box".
In fact profits arising from a variety of activities will be eligible, including e.g.:
- sales of patented products
- sales of spare parts for patented products
- use of a patented manufacturing process
- use of a patented diagnostic technique
- income from the sale of patents
- damages or other compensation awarded for patent infringement