Uptake of the Patent Box
Posted in | Dec 12, 2016
HMRC has released a report on statistics on the uptake of the Patent Box for the first full financial year that the Patent Box was in effect, 2013/2014. The Patent Box is a tax relief scheme that allows companies to pay a lower rate of Corporation Tax on profits derived from patented inventions.
The figures are broken down by company size (using the EU Enterprise Size Classification), industry sector, and geographical region.
The delay in publishing the statistics for the 2013/2014 financial year is because companies are allowed to back-date their Patent Box claims up to two financial years.
For 2013/2014 financial year, 700 companies claimed a total of £342.9 million in tax relief under the Patent Box.
“Large” companies claimed 95.4% of relief yet accounted for just 32.1% of the number of Patent Box relief claiming companies.
Most companies (63.6%) claiming tax relief were in the manufacturing sector.
Not unsurprisingly, manufacturing companies claimed the highest value of relief (63.3% of the total).
There was regional variation amongst the relief claiming companies (16.4% of the total number of companies were based in the South East of England whilst 2.1% of the total number of companies were based in Northern Ireland).
Similarly, there was also regional variation for the value of the relief claimed (companies in London claimed 57.4% of the total relief whilst companies in the North East claimed 0.5% of the total relief).
Since this is the first release of Patent Box data, it is not possible to analyse trends. However, there is an important point to consider.
Participation in the Patent Box for the 2013/2014 financial year was much lower than expected. The Government estimated that the first full year of the Patent Box would cost £500m, whilst the actual Patent Box relief claimed for the 2013/2014 financial year was just 69% of this estimate, £342.9m. This is supported by tax relief being claimed by just 700 of the 1,117,780 companies that paid Corporation Tax in the relevant period, claiming relief of just £342.9m compared to the total Corporation Tax receipts of £39.6 billion.
The reasoning behind the limited uptake of Patent Box relief is unclear, but it could be simply due to a lack of knowledge of the scheme, or perhaps the additional expenses in collecting the necessary data and completing the formalities required to participate in the scheme.
We would therefore hope that the Government now takes steps to publicise the Patent Box and its potential to assist UK companies in order to encourage more businesses to recover Corporation Tax on profits attributable to their patented inventions, to help promote the UK as the destination of choice for innovative companies.
If you would like to file a new patent application, accelerate prosecution of an existing patent application or re-evaluate your patent application filing strategy in order to take advantage of the Patent Box, please get in touch with us today.
If you have an existing patent or patent application and would like to elect into the Patent Box, please contact your accountant or get in touch with us and we can refer you to a recommended accountant who can advise you on the Patent Box.