The Patent Box regime offers a 10% corporation tax rate on “Relevant Intellectual Property Income.” This rate will be phased in over a four year period, with 60% of the benefit being available from 1 April 2013, increasing by 10% each year until 100% of the benefit is obtained from 1 April 2017.
In reality, this will not mean that all profits resulting from sales of items incorporating patented technologies or from other IP derived income will be taxed at 10% because the regime is designed only to attach to the ‘super profits’ generated from developing and holding patents. Nevertheless, it will be a significant benefit for many companies who own patents.
In order for a company to benefit from the Patent Box, three key criteria must be satisfied:
• It must be actively involved in the creation of the IP;
• It must own the IP or be granted an exclusive licence to use it in a territory; and
• The IP must be patented by the UK patent office, the European patent office or certain other patent offices around the world.
The third criteria means that only patented technology will be eligible for the Patent Box. Other forms of IP, such as know how or trade marks are not eligible (although of course a patented product may also include know how and a trademark).
Benefiting from the Patent Box
In order to benefit from the Patent Box, a company must choose to enter into an election. However, before that decision can be taken, a number of other steps must be taken, which we can assist with; including:
• Identifying whether you hold relevant IP;
• Working with your lawyers and patent attorneys to determine whether you should apply for patents over products or processes that you have developed- the ability to benefit from the Patent Box is only one factor in this decision;
• For international groups, considering whether the IP should be held in the UK or whether there are more beneficial regimes overseas; and
• Structuring your company in order to maximise the relevant IP income to which the Patent Box can apply.