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Are you a manufacturing company in the UK looking to gain a competitive edge and boost your bottom line? Patent Box is a tax incentive scheme designed to encourage innovation and reward businesses for their R&D efforts.

In this article, we will explore what the Patent Box is, how it benefits manufacturing companies in the UK, and address frequently asked questions to provide you with a comprehensive understanding of the scheme.

What is the Patent Box?

The Patent Box is a tax incentive scheme introduced by the UK government to support innovation and retention of intellectual property. It allows qualifying businesses to benefit from a reduced rate of Corporation Tax (10%) on profits generated from patented inventions.

How Does the Patent Box Benefit Manufacturing Companies?

Reduced Corporation Tax Rates

One of the key benefits of the Patent Box is the reduced Corporation Tax rate of just 10%. This significant tax advantage allows businesses to continue to develop or maintain their IP, driving innovation within their company and the manufacturing sector.

Encouraging Innovation

The Patent Box scheme is designed to encourage innovation within the manufacturing industry (and others). This encouragement of innovation fosters a culture of creativity and problem-solving, enabling manufacturing companies to develop cutting-edge products and technologies that can revolutionise their respective sectors.

Retention of Intellectual Property

The Patent Box encourages manufacturing companies to retain their intellectual property within the UK. By providing tax advantages for profits generated from patented inventions, businesses are incentivised to keep their innovation activities within the country. This retention of intellectual property contributes to the growth and development of the UK's manufacturing sector, fostering economic stability, trade, export and prosperity.

How can my manufacturing company qualify for the Patent Box scheme?

To qualify for the Patent Box scheme, your manufacturing company must hold qualifying intellectual property rights, and the patents must have been granted by the UK Intellectual Property Office or the European Patent Office. You must also have made a significant contribution to the creation or development of the patented invention.

You can claim relief for patents granted before the introduction of the Patent Box scheme. However, the relief will only apply to profits generated after the 1st of April 2013, when the scheme was first introduced and that have not expired (usually expire 20 years after the application was made).

Like most tax reliefs, claims can only be made within 2 years from the end of the accounting period i.e. if a 31 March 2023 year-end you would have until 31 March 2025 to make a claim. You can though apply for pre-grant relief where you have applied for a patent, but it has not yet been granted. This can in some circumstances protect the tax relief outside of the normal 2-year claim period.

Are there any restrictions on the types of manufacturing companies that can apply for the Patent Box?

As long as you are a manufacturing company in the UK, or part of a foreign group with a UK entity that holds the IP rights, then you are eligible to apply for the Patent Box scheme. It is still advisable to consult with a qualified and reputable Patent Box tax advisor to determine if you qualify for the scheme.

We encourage you to contact the Radius team today for a free consultation if you are unsure of your eligibility. Alternatively, you can download our free Patent Box Guide.

Download Patent Box Guide


Darryl Hoy

Darryl is the Technical Director of the Radius team. He is a specialist in Research & Development tax reliefs, having previously worked at HMRC as an R&D Tax Inspector.

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