Last month, HMRC published their annual stats for the tax year 2022-23 for R&D and Patent Box.
My colleague Chris Knott has written about the R&D stats HERE. The Patent Box stats show less change year on year than R&D, but that in itself is worth comment.
WHAT DO THE STATS TELL US?
In the tax year 2022 to 2023, it was estimated that 1,600 companies elected into Patent Box (1,630 in the previous year, so fairly consistent). In the same period, c65,000 companies made an R&D claim.
Now, if we assume that even half of the companies making genuine R&D claims have the potential to patent their technology (and I would argue it is more than half), and if we take into account the fact that some of these companies may not be making profits on their patented tech, we can see that there is still an enormous gap between R&D claimants and Patent Box claimants.
The value of Patent Box tax relief shouldn’t be underestimated. With the main rate of corporation tax set at 25%, the ability to pay tax at 10% on a proportion of taxable profits is to be welcomed.
The total value of relief claimed under Patent Box increased to an estimated £1,468 million in the 2022-23 year (£1,327 million in the previous year), and most of this relief is claimed by large companies (who make up 94% of the value claimed but only 25% of claimant companies). However, the benefit is of equal application to smaller companies.
WHAT’S CAUSING THE INBALANCE?
I suspect the disparity here is that traditionally smaller companies have taken the view that seeking patent protection isn’t for them – common misconceptions around the cost and the time involved in applying for patents can dissuade companies from going down this route.
However, with the reduction in the R&D rate for smaller companies taking effect, I believe Patent Box is a viable alternative for companies seeking to manage their corporation tax charge, and I would encourage any company making R&D claims to have a conversation with a patent attorney to determine what options are available in terms of patenting their tech.
For more information on how Patent Box could benefit your company, and to link in with a patent attorney who will be able to assist with this, get in touch.
