Simple Guides

Income earned from exploiting patented inventions

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%.