A new 10% tax rate for companies who receive income from the exploitation of qualifying patent rights is due to be introduced from April 2013. This new regime, known as the Patent Box regime will apply to companies who have developed a patented product or who have the exclusive licence to sell such a product.
This reduced rate of tax is being phased in over 5 years and will be delivered through an additional deduction in the corporation tax computation. Companies must opt into the regime for it to apply.
Income that will fall into the patent box regime will include:
- worldwide sales of the patented item
- worldwide sales of a product incorporating the patented item
- worldwide licence fees and royalties from the qualifying patents
As can be seen from the types of income that potentially qualify, the new regime appears to be extremely wide ranging and could have huge benefits for many companies, particularly if the company has also benefitted from research and development tax credits on the development of the patented item.
Some work will be required in identifying and monitoring the qualifying income and there are specific rules for apportioning profits and specific expenses.
In order to benefit as soon as possible from this low tax rate, we recommend getting systems in place now to identify any qualifying products and income.
Consideration might also be given to whether to apply for patents on products where such applications are possible but have not necessarily been considered worthwhile in the past.
Visit our helpsheet section for more information on both R & D tax credits and the Patent Box
To find out whether you can benefit from the new patent box regime or for advice on preparing a claim, please contact Jane Parry on 01254 679131 or email firstname.lastname@example.org