The Patent Box is a boost for businesses investing in R&D and will provide a reduced [10%] corporation tax rate for companies which will be introduced progressively from April 2013.
It will apply to companies exploiting patented inventions or certain other innovations and the reduced rate will apply to a proportion of the profits derived from:
- licensing or sale of the patent rights;
- sales of the patented invention or products incorporating the patented invention;
- use of the patented invention in the company’s trade; or
- infringement and compensation.
For Example: if a company has trade corporation tax profits of £1000, which qualify in full for the Patent Box when the main rate of tax is 22%, then instead of arriving at a tax charge of £100 by multiplying £1000 by 10%, the calculation is as follows:
Profits of Company’s trade chargeable to CT £1,000 Patent Box Deduction 1000 x (22-10)/22 £545 Profit Chargeable to corporation tax £455 Tax Payable £455 x 22% £100
Find out more about this scheme including guidance about legislation for the Patent Box at http://www.hmrc.gov.uk/budget-updates/march2012/patent-box-tech-note.pdf