Design of the 'Patent Box'

Date: 21 February 2012
Contacts: Rachel Griffith and Helen Miller
In 2013 the government will introduce a Patent Box – a policy that will reduce the rate of corporation tax on income derived from patents from 25% to 10%. The policy is poorly targeted at encouraging research.

IFS researchers have contributed to the consultation on the design of the Patent Box. Under the proposed design a substantially larger amount of income will be eligible for the lower tax treatment, thus weakening the link between the size of the tax deduction and the amount of underlying innovation and increasing the deadweight cost of the policy.