A new era for the UK patent box

The UK patent box regime is a statutory tax incentive regime that enables companies to claim an effective 10% corporate tax rate on certain qualifying IP profits. The patent box regime is a valuable UK incentive and will become even more beneficial with the announced increase in the UK corporation tax rate to 25% from 1 April 2023. All companies claiming patent box relief are subject to the new nexus regime from 1 July 2021. These new rules require claimants to track their R&D expenditure in order to calculate a cumulative ‘nexus’ R&D fraction, between 0 and 1, and apply this to their relevant IP profits, which must now be calculated using a streaming methodology. In most cases, compliance with the nexus patent box regime needn’t be onerous. However, claimants will be expected to document their position and monitor it going forwards.