Qualifying IP
Patents granted by the UK Intellectual Property Office, the European Patent Office or certain EEA offices, plus some equivalent rights such as supplementary protection certificates and plant variety rights.
Patent Box UK
Patent Box: an effective 10% tax rate on patent profits
The Patent Box lets UK companies pay corporation tax at an effective 10% on profits from patented inventions, instead of the 25% main rate. It is the natural next step after grants fund your R&D and R&D tax credits recover part of the cost.
Who qualifies for the Patent Box
A company must meet four conditions.
Ownership
The company must own the patent or hold an exclusive licence to it. Group companies that do not develop the IP themselves must actively manage it.
Development
The company, or a group company, must have made a significant contribution to creating or developing the invention or a product that uses it.
Election
The company elects into the regime, normally within two years of the end of the first accounting period it wants to claim for.
How the relief is calculated
Relevant IP profits are worked out in stages: identify income from patented products, licences and notional royalties; strip out a routine return on costs and any marketing return linked to brands; then apply the nexus fraction. The result is deducted so that the qualifying profit is taxed at an effective 10%.
The nexus fraction rewards companies that do their own R&D. Work done in house or subcontracted to unconnected parties counts in full; R&D bought from related parties and acquired IP reduce the fraction. Good R&D records are therefore the foundation of a strong claim.
Grants, R&D tax credits and Patent Box together
Innovation grants fund the riskiest early work. R&D tax credits recover part of what you spend yourself. The Patent Box then reduces tax on the profits once the invention earns. Because we do all three, the records and project narratives built for one feed straight into the next.
Start with the R&D tax relief calculator, browse live grant competitions or read our guide to capital allowances for R&D companies.
Patent Box: common questions
What is the Patent Box?
The Patent Box is a UK regime that lets companies apply a lower effective corporation tax rate of 10% to profits earned from patented inventions. It covers profits from selling patented products, products containing a patented component, licensing income and some notional royalties for using a patented process.
Can I claim Patent Box and R&D tax relief?
Yes. R&D tax relief rewards the spend on developing the invention, while the Patent Box reduces tax on the profits it later earns. Your R&D records also feed the nexus fraction, so planning both together saves work and protects the benefit.
What is the nexus fraction?
The nexus fraction scales relief by how much of the underlying R&D the company did itself or subcontracted to unconnected parties, compared with R&D bought in from related parties or IP acquired. More in-house R&D means a larger share of profit qualifies.
Can I claim while my patent is still pending?
You can elect in once the patent is granted and claim back relief for profits earned while the application was pending, for up to six years before grant, provided you were in the regime at the time.
Is the Patent Box worth it for a startup?
It matters once patented products or licences generate taxable profit. Loss making companies gain little until then, but filing patents and keeping R&D records now makes later Patent Box claims far simpler.
See whether the Patent Box fits
Book a short call. We will check your patents, profits and R&D records and tell you plainly whether an election is worth making.