UK businesses claimed £942.5 million ($1.23 billion) in tax relief under the country’s Patent Box in 2016/17 according to recent data.
The statistics, which showed a year-on-year increase of 25% in claims, were released yesterday by HM Revenue & Customs. The data is not complete because of a time lag in businesses reporting the claims, which means that the total amount claimed is likely to be revised upwards in the next report.
According to the data, 1,025 companies used the Patent Box, over a quarter of which were classified as ‘large’ and which accounted for 96.3% of relief given in 2016/17.
Most claimants were in the manufacturing industry (37.1%) but wholesale and retail trade and repairs were also front runners. London-based businesses, unsurprisingly, made more than half (55.3%) of the total number of claims.
The Patent Box enables businesses to apply a 10% rate of corporation tax to profits earned from patented inventions, compared to the standard 19% rate, formerly 20%.
The new statistics suggest that the value of relief claimed in 2014/15 was £652.2 million, which shot up to £754.3 million the following year.
According to the report, the Patent Box is intended to boost the patenting of IP assets developed in the UK and to ensure that new and existing patents are better developed and commercialised.
“We seem to be heading towards a point where claims will be worth £1 billion, which the government estimated from the start,” said Paul Loustalan, partner at Reddie & Grose.
He added that while large companies are clearly still the biggest users of the system, SME firms appear to be reaping significant rewards. The average return for small companies was £30,000 and for medium companies it was £95,000, which would pay for a lot, if not all, of their IP budgets.
He pointed out that large companies are getting better at making claims and that small companies may not be getting into the system as much because of the associated overheads of including a Patent Box entry into accounts and keeping track of it.
“I wonder if that may be keeping smaller companies away,” he said. “I expect that there are many more small companies with IP out there that could go in.”
