Initiative overview
Introduced on 1 April 2013 and fully phased in by 1 April 2017, the Patent Box regime is administered by HMRC under Part 8A of the Corporation Tax Act 2010. It allows qualifying UK companies to apply a 10% corporation tax rate (compared to the standard 25% rate) on profits attributable to qualifying intellectual property income, including income from patents granted by the UK Intellectual Property Office, the European Patent Office, or the national patent offices of certain EEA states. Eligibility requires the company to be subject to UK corporation tax, to own or hold an exclusive licence for a qualifying patent, and to have undertaken qualifying development (i.e. made a significant technical contribution). The OECD nexus approach applies: relief is proportional to the fraction of R&D carried out by the company itself. The regime applies to patent-related income from sales of patented products (even if only one component is patented), licence royalties, damages from infringement, and process-linked profits. AI companies can benefit when their systems, algorithms, or processes incorporate patentable technical inventions. Software patents qualify where they cover a technical improvement to a product or process (not mere software as such). The Patent Box is typically used alongside the R&D tax credit regime (merged RDEC/ERIS). According to HMRC, the manufacturing sector accounts for over 60% of claimants by number and the majority of relief claimed. In 2022–23, approximately 1,600 companies claimed, yielding £1.47B in tax relief. HMRC published updated compliance guidance (GfC9) in November 2024 requiring more detailed Patent Box computations.
