Changes ahead for the UK Patent Box

Many of our UK clients will know of the existence of the “Patent Box”, which is something we have been championing since its introduction in 2013.  In essence, the Patent Box allows UK companies to claim a reduction of up to 50% on the rate of corporation tax payable on profits made from the sale of patented products or services.  In many circumstances, this makes the filing of a patent application an extremely attractive proposition financially, since the costs incurred in filing the application can often be recouped within a few years, whilst the resulting tax savings available via the Patent Box benefit net profitability for years to come.

However, as from 1st July 2021, all companies claiming under the “old” Patent Box rules will automatically be shifted to the new Patent Box rules.  Unfortunately, the new rules are more complicated than the old rules.  For example, under the previous rules, a company could apportion profits on the basis of combined income from all eligible patents over total income.  This is not possible under the new rules, and it will be necessary to make a separate profit/loss calculation for each patent.   For companies which own large patent portfolios covering multiple products, this could be rather onerous.

We recommend that you contact your accountant to discuss these issues if you are already claiming Patent Box tax relief, or are considering doing so, to ensure that you have appropriate measures in place for the new Patent Box regime.