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HMRC have published a guide that covers the minutiae of the forthcoming relief for innovative businesses.
The patent box – announced in the 2009 pre-Budget report – will enable companies to apply a lower, 10% rate of corporation tax to profits earned from patents and some advances. The relief will be phased in from 1 April 2013.
The company must own or exclusively license-in the patents on which qualifying development must be undertaken. A firm that is a member of a group may qualify if another business in the group has undertaken the qualifying development.
To claim the patent box relief, the company will have to make an election to benefit. This will be done in the computations accompanying the company tax return, or separately in writing.
The election will have to be made within two years after the end of the accounting period in which the relevant profits and income arose.
There will be no box on the company tax return for making the election. Instead, the 10% rate will be applied by subtracting an additional trading deduction from the corporation tax profits.
