The Patent Box rewards the profit your R&D produces.

A company that elects into the Patent Box pays Corporation Tax at 10% on its relevant IP profits, instead of the main rate. The 10% special IP rate is set out in section 357A of the Corporation Tax Act 2010. Only profits attributable to qualifying patents and similar rights benefit. The rest of the trade's profits are taxed in the normal way, so the saving depends on how much of your profit genuinely comes from the protected invention.

Yes, you need a qualifying IP right that has actually been granted, or an exclusive licence over one. A pending application on its own is not enough. Section 357BB covers UK and European patents, supplementary protection certificates and plant breeders' rights, plus corresponding rights from specified EEA states. A trade mark, a copyright or a trade secret does not qualify, however valuable it is to the business.

You make the election in your Company Tax Return computations or separately in writing. HMRC says there is no special form of words. The election must be made within two years after the end of the accounting period in which the relevant profits arose. Because the deadline runs from each accounting period, it is worth deciding early so a late election does not forfeit a period's benefit.

The development condition asks whether your company, or another member of its group, has carried out qualifying development for the patent. Section 357BC sets out four routes, including cases where a company joins or leaves a group. It is aimed at businesses that have genuinely developed the invention themselves rather than simply bought the right. We review the history of each patent against these routes.

If your company is in a group, it must meet the active ownership condition under section 357BE. In broad terms, the company must carry out a significant amount of management activity on its qualifying IP rights, meaning planning and making decisions about how they are developed or used, or otherwise meet the development condition. It stops a company simply holding rights that others manage.

The R&D fraction scales the benefit to the R&D your company or group really carried out. Under section 357BLA, it compares qualifying spend on in-house R&D, on R&D subcontracted to unconnected and connected parties, and on acquiring IP. The fraction is capped at 1. A company that does all its R&D itself, or through unconnected subcontractors, and buys in no IP, can reach the maximum.

Streaming is the way relevant income is separated into streams so that profit from qualifying IP is not mixed with other income. HMRC's guidance says streaming applies to companies that elected after 30 June 2016, to new patents after that date, and to companies in the Patent Box from 1 July 2021. If you are electing now, you should expect to work on a streamed basis.

The Patent Box has its own conditions, set out in Part 8A of the Corporation Tax Act 2010, and they are different from the R&D relief rules. How the two work together depends on your facts and your accounts. We check how the Patent Box interacts with your R&D claim, and we make sure the R&D spend used in any Patent Box calculation is consistent with the figures in your claim.

The Patent Box works by reducing the Corporation Tax on relevant IP profits, so it only helps once an invention is making profit. A company that is still loss-making usually gets its value from R&D relief at this stage. It can still be sensible to keep records of patent development now, so the Patent Box is available when profits arrive.

The R&D fraction uses spend that is relevant to the qualifying IP: work done in-house, work subcontracted to unconnected and connected persons, and amounts paid to acquire IP. These are defined under the Patent Box rules in Part 8A of the Corporation Tax Act 2010, which are separate from the cost categories in an R&D claim. We map your project records to both so they tell the same story.