At ForrestBrown, we pride ourselves on our technical firepower when it comes to innovation incentives. Patent Box relief is one incentive where awareness and knowledge are limited amongst many UK businesses. In this article, we reveal eight need-to-know technical details around patent box relief to help you realise the full benefits of your IP.
The ins and outs of UK Patent Box
1. Electing into the Patent Box regime
You can elect into the regime in writing but more commonly it is actioned as part of the tax computation that accompanies the CT600 (or an amendment to the return). Either way, the election has effect from the start of the accounting period stated in the notice. It will then apply to all trades of the company and for all subsequent accounting periods until it is revoked.
2. Revoking an election
If a company wishes to leave the regime, then it will have to apply a five-year bar. This means they cannot make a patent box claim for five years beginning on the day after the last day of the accounting period in which the election was revoked (i.e. a company with a 31 December 2023 year end may not elect back in until the 31 December 2029 accounting period).
3. Who qualifies?
Only companies can benefit from patent box. However, where qualifying IP is developed on a collaborative basis using partnership arrangements, a corporate partner in the partnership may obtain the benefits of the Patent Box. In this scenario, one partner is a company and the trade profits are computed as if the partnership were a company.
4. What income qualifies?
When it comes to a Patent Box claim, there is more qualifying income than some expect. Qualifying income includes that from products and bespoke spare part sales, royalties, milestones and licence fees, along with patent sales damages for infringement and other compensation payments. This also includes intragroup sales.
5. Software does qualify
If your software-related invention solves a technical problem, it could indeed be patentable. This means that any income generated will be eligible for the Patent Box regime. Our software sector specialists possess the industry and technical know-how to provide tailored advice on your software innovation.
6. Patent Box pending
Patent Box cannot be claimed until the year of grant. However, a company can make a s357A(1) election in the years in which the patent is pending.
Why would you want to do this?
In the year of grant, your company would then be able to benefit from Patent Box on profits arising in the years in which the patent was pending. A company can claim on profits from the date of the application to the year of grant, up to a maximum of six years.
7. Relevant IP losses
In cases where a company is elected into the regime and generates a relevant IP loss, it can be used to reduce the relevant IP profits of other group members. Any balance will be carried forward and will reduce future relevant IP profits in the same company.
8. Company must own a patent
A company can hold an exclusive license which confers all rights from a patentee to another company. The licensee may then be eligible to claim Patent Box relief, as well as the licensor for royalties earned through the exclusive licence.
Map your Patent Box opportunities with ForrestBrown
If you want to understand the ins and outs of Patent Box and have an expert map and analyse relief opportunities for your company, then speak to ForrestBrown today. As market leading innovation incentive specialists, we help companies like yours amplify the benefits of their innovation with Patent Box tax relief.
There is a huge amount of potential for businesses to claim R&D tax and patent box relief together. ForrestBrown can help you make the most of the innovation toolkit.