Rules and ethics
Business tax credits: Patent Box and creative reliefs
Business tax credits for UK companies: see how Patent Box, video games and screen credits, theatre, orchestra and exhibition reliefs fit.
What to take away
Business tax credits and reliefs in this guide are for companies within Corporation Tax; sole traders and ordinary partnerships cannot claim Patent Box or creative industry reliefs in their own right.
- Patent Box suits a company that owns or exclusively licenses a granted patent and developed the invention, and taxes qualifying profit at an effective 10%.
- Video Games Tax Relief closed to new claims for accounting periods starting on or after 1 April 2025. The Video Games Expenditure Credit replaced it, with a 34% credit on core expenditure.
- Theatre Tax Relief remains open, but its temporary higher rates ended for expenditure from 1 April 2025.
- Claims go through the Company Tax Return. Patent Box also needs an election, and creative relief claims require an HMRC additional information form.
Four reliefs, four gates
| Relief | Suits | Benefit | Main gate |
|---|---|---|---|
| Patent Box | Patent owners | Effective 10% rate | Granted patent and development test |
| Video Games Expenditure Credit | Games developers | 34% credit | BFI cultural test |
| Theatre Tax Relief | Theatre producers | Deduction or payable credit | Qualifying production and cultural test |
| R&D tax relief | Companies facing technical uncertainty | 20% credit or enhanced support | Company liable to Corporation Tax |
A patented process points to Patent Box, a games studio to VGEC, a theatre producer to Theatre Tax Relief.
Firms with none of those may still have an R&D claim, and how HMRC assesses R&D claims from small companies covers the evidence that supports one.
Patent Box: two gates and a formula
The qualifying IP requirement needs a granted patent, or an exclusive licence over one. A pending application does not count.
The development test needs qualifying work by the company, work done on its behalf, or significant activity to develop the invention.
Patent Box eligibility and calculation
- Hold a granted qualifying patent or exclusive licence
- Show qualifying development work on the invention
- Identify profit on products using the patent
- Apply routine return deduction to that profit
- Tax remaining qualifying profit at reduced rate
Start with relevant IP income and deduct a routine return of 10% of relevant routine costs.
Example: Patent Box on £500,000 of relevant IP income
Routine costs of £200,000 at 10% give £20,000, so qualifying residual profit is £480,000. An R&D fraction of 0.8 leaves £384,000 of relevant IP profit.
Patent Box guidance covers the election and the streaming of profits.
Creative reliefs: games, screen, theatre, orchestra and exhibitions
The Video Games Expenditure Credit is now the route for new games claims, at 34% of qualifying core expenditure. The notional tax deduction rose to 25% from 1 April 2025, up from 19%.
Audio-Visual Expenditure Credit (AVEC) is the current route for eligible film, high-end TV, animation and children's TV productions. It replaces Film Tax Relief, High-end Television Tax Relief, Animation Tax Relief and Children's Television Tax Relief for productions within the new regime; transitional rules may leave claims under the predecessor schemes for earlier productions. The standard AVEC rate is 34% of qualifying expenditure, with an enhanced rate available for qualifying independent films. Productions must meet the applicable BFI cultural test or qualify under an official co-production route.
Older accounting periods may still be claimed under the old VGTR rules.
The company must be the developer, not a contractor, and the game must pass the BFI cultural test: 35 points available, 18 needed.
Theatre Tax Relief gives an additional deduction on qualifying core expenditure, and a loss-making producer can surrender the loss for a payable credit. Touring productions attract the higher rate. For expenditure from 1 April 2025, the payable credit rate is 20% for non-touring productions and 25% for touring productions.
Orchestra Tax Relief is for eligible orchestral production companies putting on qualifying orchestral concerts; the payable credit is 25% of qualifying expenditure.
Museums and Galleries Exhibition Tax Relief is for eligible exhibition production companies staging qualifying public exhibitions. Its payable credit is 20% for non-touring exhibitions and 25% for touring exhibitions.
The temporary theatre uplift ended on 31 March 2025. HMRC's creative industry tax reliefs guidance sets out the qualifying productions and claim requirements.
Claims, deadlines and the records HMRC expects
Make claims in the Company Tax Return and the relevant supplementary pages. File the return within one year after the accounting period ends; most relief claims and the Patent Box election must be made within two years after the end of the relevant period. For creative reliefs, submit HMRC's Creative Industry Tax Reliefs Additional Information Form before filing the return.
Claims, deadlines and records
- Confirm the gatepatent grant, certification or cultural test.
- Split expenditure between qualifying and non-qualifying.
- Build the computation and its effect on the tax liability.
- File the return and supplementary pages by the deadline.
- Keep evidence for six years and amend if the position changes.
Keep the licence, contracts, cost schedules and calculation with the accounts. HMRC can enquire, and the burden of proof is the company's.
Fitting the reliefs together
R&D relief and Patent Box can run in the same period, because each uses a different definition of qualifying work. The order changes the answer.
R&D relief normally reduces profit before the Patent Box calculation, which shrinks the qualifying residual profit.
From accounting periods beginning on or after 1 April 2024, the merged R&D scheme gives a 20% credit. R&D intensive loss-makers can use an 86% additional deduction and a 14.5% payable credit.
Corporation Tax rates set the rates the final calculation uses: 25% above £250,000 of profit and 19% up to £50,000. Marginal relief applies between those limits, with thresholds affected by associated companies and short accounting periods. Public money on a production can raise subsidy control questions, which the UK rules on grant funding and advertising explain.
Common questions
Can a loss-making company get cash back?
Where the relief allows, yes. Theatre Tax Relief and VGEC both permit a loss to be surrendered for a payable credit, and a surrendered loss cannot also be carried forward.
Can I claim Patent Box and R&D relief together?
Yes. Work out the order first, because R&D relief reduces the profit that Patent Box then reduces again.
Do I need the patent granted before I claim?
For Patent Box, yes. A pending application does not qualify, and the earliest periods of a product's life may fall outside the relief.
