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Does your limited company own a patent? If so, you may be able to benefit from claiming tax relief on your Corporation Tax bill using the Patent Box scheme. This guide will walk you through the Patent Box, who qualifies, and how to apply for relief.

What is the Patent Box scheme?

The Patent Box allows eligible businesses to pay Corporation Tax at just 10%, rather than between 19% and 25%, on the profits they earn from patented goods or services. The scheme was introduced as a way to encourage businesses to commercialise their intellectual property (IP). Our short video explains about Corporation Tax in a bit more detail, or carry on scrolling to learn more about the scheme.

Is my business eligible for Patent Box tax relief?

To qualify for tax relief under the Patent Box scheme your business must:

  • Operate as a limited company and be liable for Corporation Tax
  • Own a patent, or have exclusive permission (known as ‘licence’) to use it
  • Make a profit from patented inventions, such as selling products or licensing the patent rights to someone else for a profit
  • Have undertaken qualifying development on the patent
  • Have a patent granted by either the UK Intellectual Property Office or the European Patent Office

If you haven’t already patented your inventions, ideas, or software, you may want to get the ball rolling.

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Is Patent Box tax relief the same as R&D tax credits?

The Patent Box and R&D tax relief schemes are two separate types of relief. Essentially, the R&D tax credit deals with the ‘back end’ costs of developing and creating. The Patent Box scheme deals with the profits made on the patented outcome.

If you’re researching and developing an innovative product or service that will benefit a lot of people, you may be able to claim Research and Development (R&D) tax credits. This is a form of tax relief available on the costs of staffing, materials and so on, associated with the research project.

The Patent Box helps companies to reduce their tax bill by enabling them to pay a lower rate of Corporation Tax on the profits they make on something they’ve patented.

Can I claim R&D and Patent Box tax relief on the same thing?

Yes, the two tax relief schemes can be used together. For instance, you might claim R&D tax credits on the project costs of developing your innovation, and then patent it and use the Patent Box scheme to pay less Corporation Tax on the money you make from your patented product or service.

How do I elect into the Patent Box?

There’s no application form as such, which only adds to the mystery! To use the Patent Box, HMRC advise that those eligible should either write to them, or include the relief as part of their calculations when completing a Company Tax Return.

If you would like to learn more about how our online accountancy services can help your business, give us a call on 020 3355 4047 and get an instant online quote.

About The Author

Beth-Anne Karellen

I'm an experienced and fully AAT and ACCA qualified accountant, who is enthusiastic about helping business owners succeed. I also love cooking and needlepoint (at different times!). Learn more about Beth.

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