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The Patent Box: New tax break for patents

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If your business holds patents for its innovations, you could be eligible reduce your tax bill on any profits made from them from 1 April 2013, thanks to the new Patent Box scheme.

The Patent Box will allow companies to elect to apply a 10% rate of corporation tax to all profits from qualifying patents. Profits can be those paid separately as royalties or included in the price of products.

The scheme is designed to encourage UK companies, including small businesses, to locate high-value jobs associated with the development, manufacture and exploitation of patents in the UK and maintain the UK's position as a world leader in patented technologies.

To be eligible, companies must either: own the patents or have exclusive licenses for their use must have worked on their development (or a related company must have done so) must be making a profit from the patents.

Eligible patents are those granted by the UK's Intellectual Property Office or the European Patent Office. The relief will be phased in over several years to achieve a tax rate of 10% on profits from patents. At present UK corporation tax is 22%, coming down to 21% in April 2014, so eligible businesses will be able to save at least 12% in corporation tax.

Further information is available on the HMRC website, it has also produced a video explaining the Patent Box.

To read more on how to protect your intellectual property rights, click here

Last updated 7th June, 2016

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