Not all of your company profits may come from exploiting patented inventions. To be relevant IP (intellectual property) income, it must come from at least one of the following:
- selling patented products – that is sales of the patented product or products incorporating the patented invention or bespoke spare parts
- licensing out patent rights
- selling patented rights
- infringement income
- damages, insurance or other compensation related to patent rights
Your company can also benefit from the Patent Box if it uses a manufacturing process that is patented or provides a service using a patented tool. In these circumstances, you will need to calculate a notional royalty.
The Patent Box enables companies to apply a lower rate of Corporation Tax to profits earned after 1 April 2013 from its patented inventions and certain other innovations. The relief will be phased in from 1 April 2013 and the lower rate of Corporation Tax to be applied will be 10%.