This article is part 2 of a series of 5 articles relating to Patent Box.
Are Patent Box and Research and Development (R&D) Tax Credits the same thing?
No.
Patent Box, sometimes referred to as Patent Box Relief or Patent Box Tax Relief, enables UK companies to apply a lower rate of Corporation Tax to profits earned after 1 April 2013 from its patented inventions 1.
R&D tax credits, on the other hand, relate to reducing a company’s liability to corporation tax or by making a payment of a credit to the company, with both scenarios being linked to the company’s qualifying R&D expenditure 2.
What is a key difference between Patent Box and R&D tax credits?
Patent Box relates to profits from patented inventions.
A patented invention in the context of Patent Box relates to a patent (not a patent application) that is granted by:
- the UK Intellectual Property Office;
- the European Patent Office; or
- some countries in the European Economic Area 1.
R&D tax credits, however, are not limited to merely patented inventions.
Can I claim Patent Box and R&D tax credits?
Yes – claiming either Patent Box or R&D tax credits does not prohibit claiming the other.
Is Patent Box or R&D tax credits claimed more often?
HM Revenue & Customs estimates that for the tax year 2022 to 2023, around 65,690 R&D tax credit claims were made whereas only around 1,600 companies elected into Patent Box.
HM Revenue & Customs also estimates that around £7.5 billion R&D tax credit support was claimed and that around £1.5 billion of Patent Box tax relief was claimed in the tax year 2022 to 2023 3 4.
How can we help?
As specialists in patent drafting and prosecution, we can prepare and prosecute patent applications to help you attempt to take of advantage of Patent Box.
Please get in touch with Thomas Measures – Appleyard Lees or Paul Beynon – Appleyard Lees if you would like to discuss whether your organisation could make use of Patent Box.
References:
1 Use the Patent Box to reduce your Corporation Tax on profits – GOV.UK
2 Background information and quality report: Research and Development Tax Credits – GOV.UK
3 Patent Box relief statistics: September 2024 – GOV.UK
4 Research and Development Tax Credits Statistics: September 2024 – GOV.UK
Click here for part 3 – Patent Box eligibility – ownership and exclusive licencing
