Following the launch of the patent box, HMRC have published a guide advising UK companies about how they can pay less tax on profits generated from their patented inventions. From April 2013, any profits from inventions that are protected by a UK patent will be taxable at a significantly lower rate of corporation tax. The relief will be phased in from April 2013, starting at around 15% and falling to 10% by 2017.
In order to receive the tax break, companies must own or exclusively license-in the patents and must have undertaken qualifying development on them. The much-publicised rate of 10% will not actually apply until 2017. Instead, the tax rate that will apply to qualifying profits in the coming financial year will be 15.2%. The tax reduction will be tapered, so the 10% rate will only apply to 60% of the qualifying profits in 2013/14, rising to the full 100% of profits in 2017. Whist clearly of limited interest to many companies, the size of the tax relief means that all opportunities need to be properly identified.