Maximising R&D tax relief: how Patent Box strengthens your innovation strategy

When used together, these incentives can significantly enhance cashflow, reduce tax liabilities and strengthen long term growth. In 2025, the businesses seeing the greatest benefit are those that approach R&D, intellectual property and tax relief in a joined up way. Below, we explore how the incentives work, how they complement each other and how companies can build a strategic approach that maximises value.

Understanding R&D tax relief

R&D relief rewards companies that invest in advancing science or technology. It applies to innovation undertaken across a wide range of sectors, from manufacturing and software to life sciences and engineering.

A project may qualify if it seeks to solve a technical uncertainty that a competent professional could not easily resolve. Crucially, the work does not need to succeed. Failed, iterative or abandoned projects can still generate eligible expenditure.

R&D tax relief is available to companies of all sizes, irrespective of profitability. Businesses can receive a reduction in corporation tax or, for loss-making companies, a payable credit. This makes R&D relief one of the most accessible and valuable innovation incentives in the UK.

If you are unsure whether your work qualifies, try our R&D eligibility test or speak with our team.

What is Patent Box tax relief

Patent Box reduces the corporation tax due on profits that arise from patented inventions. Companies eligible for the scheme can apply a rate of ten per cent to qualifying profits rather than the standard corporation tax rate.

Patent Box encourages businesses not only to develop new ideas but also to protect and commercialise them. Companies of any size can access the regime provided they:

• are subject to UK corporation tax
• own or hold an exclusive licence to a granted UK or European patent or qualifying IP righ
• carry out qualifying development activities
• generate relevant IP income, such as sales, royalties or compensation from patent infringement

Patent Box applies to profits that arise not only from the patented product itself but also from wider product ranges or processes that rely on the patented invention. This often makes the relief far more valuable than companies initially expect.

Why R&D and Patent Box work so well together

R&D tax relief and Patent Box were designed to complement each other. Together, they create a full life cycle incentive that rewards innovation from idea to commercial success.

Strengthening financial efficiency

R&D relief improves cashflow during the development phase. Patent Box enhances the return on that investment once the innovation enters the market. When applied strategically, the two reliefs can materially reduce a company’s overall tax burden and free up capital for future growth.

Supporting competitive advantage

Claiming R&D and Patent Box sends a clear signal that your company is investing in original, defensible IP. This differentiates you from competitors and reinforces your position as an innovation leader.

Enhancing reputation

Both incentives demonstrate a commitment to research, invention and long term value creation. This can increase your attractiveness to investors, partners and customers seeking credible, forward looking companies.

Improving recruitment and retention

Innovative businesses tend to attract highly skilled people. Demonstrating a strong R&D and IP strategy helps build a workforce that is engaged, motivated and aligned to your mission.

Maximising tax savings through Patent Box

To unlock the full value of Patent Box, it is important to understand the breadth of income it can apply to. Qualifying profits may include:

• sales of patented products
• sales of products that incorporate the patented technology
• licensing and royalty income
• compensation received for patent infringement

Patent Box can still apply even when others use your patented designs, provided you hold exclusive rights to develop, exploit and defend the invention across a national territory.

Many businesses underestimate the scope of profits that may fall within the regime. A structured approach to reviewing patents and revenue streams often reveals opportunities that have been overlooked.

Implementing an innovation strategy that incorporates Patent Box

Patent strategy and tax strategy should go hand in hand. Before filing a patent, your business should understand:

• the commercial purpose of the invention
• how it will generate qualifying income
• how it aligns with your R&D activity
• whether it supports long term market differentiation

Your R&D record keeping will also support Patent Box eligibility by providing a clear trail of development activity. This is essential for calculating qualifying profits and demonstrating compliance.

Grants should also form part of your wider funding strategy. You can learn more about innovation grants here.

Aligning R&D activity with Patent Box eligibility

There is no single template for alignment because every business innovates differently. However, the principles remain the same.

• Build your R&D and IP strategy early
• Capture accurate development records
• Review patents against commercial revenue streams
• Seek specialist guidance to maximise the scope of eligible profits

At Kene, we offer a comprehensive assessment that analyses your patent portfolio to ensure all qualifying profits are identified and correctly attributed.

Strategic patent filing and management

A strong patent strategy considers not just filing but ongoing management. Patent lifecycle activities include:

• monitoring potential infringements
• responding to challenges
• reviewing patent portfolios
• managing renewal fees
• enforcing rights where necessary

Managing patents can be complex, but Patent Box directly rewards the effort invested in developing and defending intellectual property.

Key considerations for maximising Patent Box value

To benefit fully from Patent Box and R&D relief, companies should ensure their claims are:

• aligned with HMRC requirements
• supported by clear evidence
• technically accurate
• robust enough to withstand enquiry

Our compliance assurance service provides the expertise and documentation needed to prepare strong, defensible claims.

How we can help

R&D and Patent Box relief can significantly improve business performance, but optimising these schemes requires time, expertise and careful planning. At Kene, our team brings together chartered tax advisers and industry specialists to support businesses throughout the entire process.

We help you:

• identify and assess eligible patents
• calculate qualifying profits accurately
• optimise both R&D and Patent Box relief
• maintain compliance with HMRC requirements
• defend claims in the event of enquiry

Get in touch to discover how our team can help elevate your innovation strategy and maximise the tax benefits available to your business.