Q: What is the Patent Box regime and what are the benefits for businesses in the 2024/25 tax year?
A: The Patent Box regime allows UK companies to pay a reduced corporation tax rate on profits earned from patented inventions. In the 2024/25 tax year, the effective tax rate is 10%. According to HMRC, the regime is designed to “encourage companies to keep and commercialise intellectual property in the UK”.
If your company earns £100,000 in profits from patented products, the tax liability would be £10,000 under the Patent Box, compared to £19,000 at the standard 19% rate.
To qualify, the company must own or exclusively license the patents and actively develop them. Plus, they must make a profit from them. Furthermore, the company must have undertaken qualifying development on the patents.
Incidentally, to give an idea of how widely this scheme is used, the most recent figures, published by the Government last year, showed in the tax year 2021 to 2022, an estimated 1,510 companies elected into Patent Box.
If you’d like to delve into the details of the regime and how your business can benefit, please contact our team.
