This article is part 4 of a series of 5 articles relating to Patent Box.
Are you eligible for Patent Box?
Patent Box can provide a generous relief of Corporation Tax. In order to be eligible for Patent Box, HM Revenue & Customs’ guidance on Patent Box specifies that you can only use the Patent Box if your company:
- is liable to Corporation Tax;
- makes a profit from exploiting patented inventions;
- owns or has exclusively licenced-in the patents; and
- has undertaken qualifying development on the patents¹.
Further details regarding Patent Box eligibility can be found – Use the Patent Box to reduce your Corporation Tax on profits – GOV.UK. We typically recommend discussing Patent Box with your accountant.
Who must the patent be granted by?
Patent Box does not relate to only patents granted by the UK Intellectual Property Office (UKIPO).
HM Revenue & Customs’ guidance on Patent Box specifies that in order to benefit from Patent Box a company must own or exclusively licence-in patents granted by:
- the UKIPO
- the European Patent Office
- these countries in the European Economic Area:
- Austria
- Bulgaria
- Czech Republic
- Denmark
- Estonia
- Finland
- Germany
- Hungary
- Poland
- Portugal
- Romania
- Slovakia
- Sweden.
What is a qualifying development?
HM Revenue & Customs’ guidance on Patent Box sets out that the definition of qualifying development requires:
- creating, or significantly contributing to the creation of, the patented invention; or
- performing a significant amount of activity to develop the patented invention, any product incorporating the patented invention, or any process incorporating the patented invention ².
What does ‘significant’ mean?
HM Revenue & Customs’ guidance on Patent Box provides some examples in which an activity could be significant. These include:
- coming up with the breakthrough idea;
- work to test or enhance the viability or usefulness of the idea;
- by virtue of the costs, time or effort incurred; or
- due to the value or impact of the contribution.
However, merely applying for a patent in respect of acquired rights, or acquiring rights to and marketing a fully developed patent or invention, or product incorporating the invention, will not be sufficient ².
What if my company only commercialises a fully developed product or process?
HM Revenue & Customs’ guidance on Patent Box specifies that if a company’s only activity in relation to the development of a patented invention relates to commercialisation of a product or process that is otherwise fully developed, then this will not satisfy the test of contributing to significant development of the item ².
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
Click here for part 5 – Patent Box – backdating and example calculation
