Beginning on 1 April 2013, the UK Government will reduce the rate of corporation tax payable in the UK on profits arising from patents and some other forms of intellectual property (“IP”). The reduced tax rate implemented by this so-called “patent box” scheme will be 10%. This Alert looks at the implications of the patent box regime and also what organisations that derive material income from patent rights can do in order to position themselves to take the benefit of the reduced UK tax regime.

The patent box regime to be implemented by the UK Government has been in the works for some time, having been trailed in a consultation exercise as far back as 2010. It mirrors the reduced tax regime that exists in some other countries (e.g., various Swiss cantons have a similar regime) and is designed to encourage the development of the technology sector as a net contributor to the overall UK economy.