The government believe that the UK cannot compete with the likes of China and India when it comes to manufacturing, but that we can compete when it comes to ‘ideas’, which is what we’re good at. The patent box is therefore designed to encourage those with innovative ideas to turn them into something that can help our economy. The incentive is in the form of an effective 10% rate of corporation tax.
To qualify, you must own or have an exclusive license in an EU or UK patent and have carried out qualifying development on it. The income can come from sale of the patented product or a product incorporating the patent, or from the rights associated with ownership.
The regime began on 1 April 2013 and is being phased in over the next four years: for the first year, 60% of profits from patents will qualify; from 1 April 2014, 70% will qualify, and so on.
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