Qualifying Income – the benefits to your business

Under the Patent Box regime a 10% rate of corporation tax applies to profits associated with:

  1. Sales Income

    Profits on income from sales of patented items will be taxed at 10% under the Patent Box regime. This extends to income from the sale of items that incorporate a patented invention and to spare parts for a patented item.

  2. License Fees

    Royalties and other licensing fees generated from a patent licensing agreement are included in the Patent Box regime. This includes licensing fees earned from a worldwide licence which are brought back to the UK. Global licensing income can qualify even if the technology is not patent protected in every country.

  3. Proceeds from the Sale of Patents

    Income from the sale of patents (and income from the transfer of an exclusive licence) also qualifies for the Patent Box.

  4. Damages for infringement
    If your business successfully brings an action for patent infringement, then any amounts recovered in that legal action can be included in the Patent Box.
  5. Other compensation

    Outside of actions for infringement, any damages, insurance and/or other compensation are eligible where such sums represent a loss in relation to income/licence fees from sales of patented products. For example, this type of income may arise in actions for recovery of sums due under a licensing agreement as contractual damages.

  6. IP-derived Income

    This is income from the sale of items (or provision of services) that are not themselves patent protected but which are produced using a patented process. An example could be the income from the sale of non-patented item such as a drinks carton where it is produced using a patented tool in the manufacturing process, or the manufacturing process itself is patent protected.
    The proportion of the sales income from the drinks carton that qualifies for the Patent Box is based on the concept of a “notional royalty”. That is, the amount that the manufacturer would need to pay to be able to use that patented tool or process if it had to obtain the exclusive rights to that patented technology in the market.

  7. If you are interested in determining whether the Patent Box could benefit your company, please contact TAP and we would be delighted to assist you.

    For more information, contact Gillian Abramson on:

    Tel: 0113 827 2410 or 020 7655 6959
    Email: gillian.abramson@taxadvisorypartnership.com