The UK Patent Box enables companies to apply a lower rate of Corporation Tax to profits earned from qualifying patented inventions. The lower rate of Corporation Tax under the Patent Box is 10% compared with the main rate of Corporation Tax, which was 20% during the period covered by most of these statistics.
Companies must notify HMRC if they wish to claim relief under the Patent Box. This has to be done within two years after the end of the accounting period in which the relevant profits and income arise. This release also includes partial statistics for the 2017-18 fiscal year. The 2017-18 figures will be updated based on a complete set of data in the next annual release (Autumn 2020) and are expected to be revised upwards.
The Patent Box statistics in this release are compiled using data collected from electronically filed company tax returns.
Here we look at the key points from the latest statistics released by HMRC;
increase in the amount of support claimed to just over £1billion
of claims were made by manufacturing companies
of relief claimed was by companies registered in London
of claims were made by SME’s
Sachin Chauhan, Managing Director of Innovation Tax Specialists, commented;
“These statistics don’t make great reading for a variety of reasons, not least of all that 95% of the relief is being claimed by large companies. In addition, there was only a 1% year-on-year increase in companies claiming the relief and the majority of the value claimed was by companies in London and South East.
Whilst Patent Box is a welcome Government initiative, new measures are needed to encourage companies to benefit and greater levels of funding required to assist SME’s patent their inventions, providing them with the necessary support to manage risk, uncertainty and associated costs.”
Taz Esmailji, Tax Director of Innovation Tax Specialists, added;
“The number of companies claiming patent box relief is increasing at a much reduced rate to the year-on-year increase in companies claiming R&D relief and as the two schemes should go hand in hand, this leads us to believe that companies are not doing enough to protect their IP. As a consequence, they are also missing out on a preferential tax rate of 10% on profits of qualifying IP.”
In 2016-17, 1,170 companies claimed relief under the Patent Box, and the total value of relief claimed was £1,035 million. So far in 2017-18, 1,120 companies have claimed relief under the Patent Box, with a total value of £993 million; these figures are expected to be revised upwards when more data becomes available. If the proportion of later claims are the same as in previous years then the total value of claims for 2017-18 is likely to be around £1.1bn.
This shows the value and volume of Patent Box claims by UK region. The two smallest regions by value of relief claimed, the North East and Wales, have been removed from the second chart to avoid disclosure.
The geographic breakdowns shown in this section are based on the UK Government Office Regions. This analysis is based on taxpayers’ addresses given to HMRC for tax purposes.
The first map shows that by far the highest total value of claims in 2016-17 was by companies registered in London. The second map shows that as a proportion of total CT revenue, the value of Patent Box claims is distributed more evenly across the UK, although still with the highest value in London.