The Patent Box will allow companies to elect for an effective 10% rate of corporation tax for profits arising from the exploitation of patented technology. The Government published draft legislation on the Patent Box regime in December 2011 and has re-affirmed that the measure will be included in Finance Bill 2012, but did not give any additional technical detail.
The regime will apply to patents granted by the UK or European Patent Office and certain other European jurisdictions, the details of which will be published in summer 2012. The regime will also apply to other qualifying intellectual property rights such as regulatory data protection, supplementary protection certificates and plant variety rights.
Who will be affected?
Companies that receive income in the UK and hold a qualifying patent or an exclusive licence to use a qualifying patent. Income can be received separately as royalties, embedded in the sales price of products, from services or underlying processes.
The measure is intended to benefit innovative industries in general. Accordingly patent filers in pharmaceutical, technology, manufacturing, energy and utilities, telecoms, aerospace, defence, consumer and media businesses should benefit.
A further draft of the Patent Box legislation will be published in the Finance Bill on 29 March 2012.
The reduced effective tax rate will apply to qualifying Patent Box profits for accounting periods beginning on or after 1 April 2013. There will be a phased introduction of the relief with 60% of the benefit applying to profits generated from April 1 2013, increasing in 10% increments per annum to full benefit in 1 April 2017
We welcome the proposal for a beneficial regime for income from patents, which is intended to support the UK's research and development and wider scientific and technological skill base. The legislation as drafted should benefit a large number of businesses and should make the UK a more attractive location to retain and commercialise patented technology.