Patent Box

A patent box is a special tax regime for intellectual property revenues. It is also known as intellectual property box regime, innovation box or IP box.

The concept was first introduced in 2000 by the Irish and in 2001 by the French Tax Authorities as a reduced rate of tax on revenue from IP licensing or the transfer of qualified IP. In Europe IP-Box regimes Belgium, Hungary, Luxembourg, Netherlands, Spain and the United Kingdom have also introduced similar schemes.

The Patent Box in the UK is a tax incentive introduced in 2013 designed to encourage companies to make profits from their patents by reducing the UK tax paid on those profits.

The UK Patent Box went live in April 2013. The UK government wants to encourage high-value growth in UK plc through a competitive tax regime that supports UK R&D from conception to commercialisation. The Patent Box forms a key part of this strategy by encouraging companies to commercialise their patents and R&D in the UK. Other countries (eg.Belgium, Luxembourg, the Netherlands) already operate schemes to provide incentives for companies to retain and commercialise existing patents

The scheme was first proposed in the 2009 Pre-Budget Report and went through various iterations and public consultations until final legislation was passed in the Finance Act 2012. The legislation is now formally a new Part 8A of the Corporation Tax Act 2010 entitled "Profits Arising from the Exploitation of Patents etc". The Finance (No.2 Bill) 2015/16 includes proposed amendments, which, if implemented, will amend the patent box rules.

The Patent Box initiative is complementary to the R&D tax incentives which encourage companies to undertake their R&D in the UK

The Patent Box allows a 10% tax rate on profits derived from any products that incorporate patents. The net benefit for claiming companies is likely to be several percentage points of their corporate earnings, given that the main rate of UK corporation tax is 20 per cent.

The steady state cost, after the initial phasing- in period, of the Patent Box is forecast to be approximately £1.1 billion in terms of corporation tax revenues foregone by HM Treasury.

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Wikipedia