Armstrong Watson advises on 'Patent Box' - an exciting new Tax Relief

HM Revenue & Customs has been consulting with tax advisers on an exciting new tax relief, the ‘Patent Box’.

Steven Holmes, tax consultant at Armstrong Watson, says, “Broadly speaking, the ‘Patent Box’ will be a reduced corporation tax rate for income generated from patents. Any company subject to UK corporation tax will only pay tax at 10% on their net income received from the patent as long as the company is actively involved in the exploitation of the patent. Rather than a simple 10% rate, there will be an ‘effective’ 10% achieved by applying a calculation to reduce profits to a level where they are effectively 10%.”

“The relief falls under the government’s ‘Corporate Tax Road Map’ to stimulate the economy by incentivising innovative high-tech companies to locate in the United Kingdom and will be phased in from 1 April 2013.”

Steven adds, “Although there are some limitations to the relief, such as its compliance burden, it will provide significant tax savings for high-tech research and development and manufacturing companies. This, in theory, should incentivise more companies to locate in the United Kingdom and companies that are already located here to further develop their research and development functions and to register more patents. The government forecasts that the relief will generate tax savings of £500 million in 2013-14, £800 million in 2014-15 and £900 million in 2015-16.” This new regime, together with the forthcoming improvements to the R&D tax relief regime, is welcome news for innovative companies.

Steven’s advice is, “If your company may be eligible for the preferential ‘patent box’ relief you need to ensure you have the patent income structured to benefit from these large projected tax savings.”

 If you have any queries regarding the ‘Patent Box’ or think you might be eligible to make a claim please contact Steven Holmes at r&

For more information about R&D tax relief visit the Armstrong Watson website:


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