It’s now ten years since Patent Box was introduced by the UK Government to encourage companies to retain and commercialise patents in the UK.
The benefits of making a Patent Box claim can be significant. It works by applying a 10% tax rate to qualifying profits arising from patented items. Though it’s now been around for ten years, compared to the popularity of R&D Tax Relief it’s claimed by relatively few companies.
April 2023 saw an increase in the main rate of corporation tax from 19 to 25%. However, the special Patent Box rate remains at 10% making it even more relevant and lucrative.
With average savings for companies in the East Midlands being c£200k per year (per HMRCs latest stats), it’s well worth companies exploring whether they can claim this relief – particularly as the relief can be available for the whole life of the patent (that’s 20 years of savings).
But when you look at the most recent statistics published by HMRC for tax year 2019 to 2020, only 1,395 companies claimed relief under Patent Box. The total value of the relief claimed was £1,220 million.
The relatively low number of claims is surprising when you consider that in the same year the number of patent applications by UK applicants to the Intellectual Property Office was 11,957. And over a further 4,000 were made to the European Patent Office. It strongly suggests that there are many eligible UK companies not making claims.
Other interesting facts we spotted include:
- 53% of the companies claiming were from the Manufacturing sector (comprising 32% of the relief)
- 20% by Wholesale and Retail (5% of the relief)
- 12% by Professional, Scientific and Technical (35% of the relief)
- London-based companies claimed the largest amount of relief (9% of claims, 46% of relief)
- 105 companies in the East Midlands claimed relief (7% of claims, 1% of relief).
Whilst it’s to be expected that most companies patenting their technology would be in manufacturing, we have claimants working in many industries, including software.
COULD YOU APPLY FOR PATENT BOX RELIEF?
We encourage all our R&D clients to consider the potential for patenting the technology they are developing. Our team of Patent Box experts work with our clients to advise on all aspects of patent box relief from establishing eligibility through to submitting the claim to HMRC. We can even put you in touch with patent attorneys to help you on your journey to a claim.
If you are one of the many companies currently claiming R&D relief, but you haven’t considered Patent Box, or maybe it’s not something you’ve looked at for a while and you would like to explore the possibilities in view of the increased benefit going forward, do get in touch. After all, you wouldn’t want to miss out.
