Jurisdiction(s):
United Kingdom

Related legal acts

Key definition

Profits definition

What does Profits mean? Profits describes the net surplus generated by a business or asset after deducting relevant costs, used to assess performance, tax liabilities, distributions and damages. The precise meaning is context‑specific. For corporation tax in the UK and Ireland, legislation provides that a company’s profits include both income and chargeable gains (capital gains), not just trading results. Key distinctions include: - Accounting profit: measured under applicable GAAP. - Taxable profits: accounting profit adjusted by statute (for example, disallowables, capital allowances, losses and group relief). - Distributable profits: profits available for lawful dividends under companies legislation (UK Companies Act 2006, Irish Companies Act 2014), broadly the company’s...

UK Patent Box: key features, eligibility and compliance—qualifying IP, development condition, exclusive licence, group rules, R&D fraction, anti-avoidance and elections

Published by a LexisNexis Tax expert

Practice notes

The patent box

The patent box is an optional regime that delivers an effective 10% corporation tax rate on worldwide profits derived from qualifying patents and comparable intellectual property (IP) rights. Its full advantages were introduced in stages over a five-year period, concluding on 1 April 2017.

To meet BEPS Action Plan 5 requirements, the patent box rules were amended on 1 July 2016 to introduce an R&D fraction restriction, which can reduce the value of patent box claims. A series of ancillary amendments was also made to ensure the restriction was implemented correctly.

Those whose election into the patent box took effect before 1 July 2016 were permitted to continue claiming under the earlier (grandfathered) regime until 30 June 2021, in relation to qualifying IP applied for before 1 July 2016 (see Practice Note: Patent box—grandfathered rules—standard calculation of relief). These revisions concern only how the patent box benefit is calculated, and do not affect the features covered in this Practice Note.

Patent boxes have been in place in a range of countries, particularly across Europe, for several years...

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David O’Keeffe

Aiglon Consulting

I am an independent specialist adviser on the taxation of innovation, advising companies and other advisers on areas such as R&D tax relief, Patent Box and Creative Industry reliefs. I am a member of the London Society of Chartered Accountants’ tax committee as well as CIOT’s Corporation Tax technical Committee (and chair the R&D Working Group of that committee)....

Web page updated on 22/05/2026

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