If your UK company has built something genuinely innovative and protected it with a patent, Patent Box could materially reduce your Corporation Tax bill. It applies an effective 10% rate to the part of your profits that comes from exploiting patented innovation. The aim is simple: encourage companies to keep and commercialise intellectual property in the UK.
This is a company relief, not a personal one. What matters is whether your company pays UK Corporation Tax and meets the Patent Box conditions.
Want to know quickly whether it is worth pursuing? Send us a short note at info@schoolgateaccounts.co.uk with what you sell, whether the patent is owned or licensed, whether it is granted or pending, and your accounting year end. We will tell you whether Patent Box is likely to be material and what you would need to evidence.
When you can apply
Most businesses look at Patent Box at one of these points:
Step 1: You already hold a granted patent (or an exclusive licence) and you are trading. If you are making profits linked to that patented innovation, you can usually claim for the same accounting period in which those profits arise, provided you elect in on time.
Step 2: Your patent is still pending. This is common for start-ups. In many cases, you do not lose the early years: the benefit linked to the application period can become available once the patent is granted, provided you have made the right election and you qualify.
One practical timing point: if your company only becomes a qualifying company part-way through an accounting period, you can normally only include the relevant IP income received after the date you became qualifying for that period.
The deadline founders miss
Patent Box is not automatic. You must elect into the regime. The election must be made within 2 years after the end of the accounting period in which the relevant profits and income arose. Miss that window and you may lose the relief for that period.
Which patents count
Patent Box generally applies to patents granted by the UK Intellectual Property Office (UKIPO) and the European Patent Office (EPO). HMRC also recognises patents granted by certain patent offices in the European Economic Area: Austria, Bulgaria, Czech Republic, Denmark, Estonia, Finland, Germany, Hungary, Poland, Portugal, Romania, Slovakia, and Sweden.
If your patent is granted elsewhere, it will not qualify on its own for UK Patent Box purposes. In some sectors, certain other medicinal or botanic innovation rights can also qualify, depending on the facts.
Do you have to own the patent
Not always. If your business has an exclusive licence to use patented technology (for example, from a university, a partner, or a group company), you may still qualify, as long as the licence is genuinely exclusive and meets HMRC’s conditions. This is a common setup for university spin-outsand businesses commercialising third-party research.
What income can qualify
Not all your profits qualify, only the part linked to exploiting the patented invention. Qualifying sources can include profits from selling patented products (and products that incorporate a patented invention),licensing out patent rights, selling patent rights, and certain infringement or compensation income related to patent rights.
Businesses can also qualify where the patent is on the process or tool used to manufacture or deliver a service. In these cases, HMRC may allow a notional royalty approach to identify the qualifying IP income.
How you apply in practice
A Patent Box claim is usually straightforward in concept and technical in execution. The process normally looks like this:
Step 1: Confirm eligibility. Your company must be within UK Corporation Tax, make profit from exploiting patented innovation, own the patent or hold an exclusive licence, and have carried out qualifying development (either directly or within the group).
Step 2: Map patents to products and revenue. You need a clear link between each patent (or licence) and the products or services that generate the qualifying income.
Step 3: Separate the qualifying profits. Patent Box is not a blanket 10% rate on all profits. The benefit is delivered through a Patent Box deduction in your Corporation Tax computations, so it depends on separating theIP-related profit from other profit in a defensible way.
Step 4: Make the election and file the claim. You can elect into Patent Box via the computations that accompany your Company Tax Return or separately in writing. There is no special form and no dedicated tick box on the return.
Step 5: Keep an evidence pack. HMRC can ask for supporting documentation. The best pack tells a simple story: what is patented, how it is used commercially, what income is linked to it, and how the qualifying profit was calculated.
If your company is in a group
Group structures can still qualify, but the company making the claim should be actively involved in managing and developing the IP portfolio (often referred to as the active ownership condition). If IP ownership sits in one company and trading sits in another, it is worth reviewing the structure before you claim.
How we help
We keep this practical and CEO-friendly. We start with a quick eligibility and value check, then map patents to products and revenue, agree a sensible approach to separating qualifying profits, and prepare the election and computations for the tax return. We also draft a clear supporting note so the claim is easy to follow if HMRC asks questions.
If you would like a quick view on whether Patent Box is worth it, email us at info@schoolgateaccounts.co.uk with: what you sell, whether the patent is owned or exclusively licensed, whether it is granted or pending, and your accounting year end.
General information only, not tax advice. Tax outcomes depend on your specific facts, accounting periods, and company structure.
