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HMRC internal manual

Corporate Intangibles Research and Development Manual

Patent Box: overview of the patent box regime: history of the patent box

Finance Act 2012 introduced a new part 8A to CTA10 (profits arising from the exploitation of patents etc) following three rounds of consultation:

  • November 2010 - The Taxation of Innovation and Intellectual Property
  • June 2011 - Consultation on the Patent Box
  • December 2011 - Draft legislation and explanatory notes, Patent Box, response to consultation, and The Patent Box: Technical Note and Guide to the Draft Legislation

The Patent Box: Technical Note and Guide to the Finance Bill 2012 clauses was published on 29 March 2012 together with the associated Explanatory Notes and clauses in the Finance Bill 2012. Guidance contained in the Technical Note has been incorporated into this guidance in the CIRD manual.


In October 2015, the conclusions of the G20-OECD BEPS project were announced. Part of this work aimed to ensure that preferential tax regimes, such as Patent Boxes, require sufficient economic substance that they cannot be used for profit shifting. This is achieved by linking benefits afforded to income generated by intellectual property (IP) under such regimes to the level of R&D expenditure incurred to develop that IP.

The Government launched a further consultation: Patent Box: Substantial Activities in October 2015 seeking views on how to bring the Patent Box within the new international principles. Draft legislation was published in December 2015 and final legislation in section 64 of the Finance Act 2016 covering both the ‘nexus’ between R&D expenditure and profits benefiting from the reduced rate (see CIRD270000 onwards), and transitional rules (see CIRD271000).