Value of Patent Box increases despite no growth in number of beneficiaries
This week’s HMRC Patent Box relief statistics show that in the financial year 2023 to 2024 the number of companies elected into the Patent Box regime remained consistent with the prior year, with 1,650 compared to 1,640 for financial year 2022 to 2023.
The data also shows a significant increase in the overall value of the relief to £1,977m, driven by the change in the main rate of corporation tax from 19% to 25% on 1 April 2023.
Graham Steele, innovation and capital tax reliefs partner at RSM UK, said: “The latest Patent Box data suggests that while the total value of tax relief claimed continues to rise, the number of companies electing into the regime has remained almost flat, maintaining levels of around 1,500 for the last five years.
“Since 2023, there has been increased focus from HMRC on research and development (R&D) claims, including more compliance checks, rate changes and, more recently, the introduction of a new merged regime. For many companies, the benefit of making (or desire to make) an R&D claim has decreased significantly. Conversely, the benefit of being elected into Patent Box, which is a separate but complementary tax relief, has increased significantly, which is reflected in the total value rising to nearly £2bn for 2023-2024. This was largely driven by the increase in the main rate of corporation tax, at which point the tax saving effectively rose from 9% to 15%. The government’s decision not to make any changes to Patent Box following the corporation tax rate increase reflects its strategy to keep innovative businesses in the UK.
“Historically, take-up of Patent Box has been disappointing. Perceived complexities of the calculation and the difficulty in forecasting post-tax cash savings have often meant companies tend to place it in the ‘too hard’ basket or deprioritise the regime in favour of other areas of business. Some also think the regime disproportionately benefits larger companies, given that 95% of the relief is received by large companies (over 250 employees). However, these companies make up only 28% of those elected in, therefore small and medium-sized businesses should not be put off by the perceived complexities, as claims can be straightforward and easy to compute, and the long-term benefits significant.
He added: “Despite these statistics suggesting otherwise, we’re seeing a growing number of businesses reconsider electing into the regime and renew existing patents. As the government rolls out the UK’s Industrial Strategy, it’s key that businesses leverage the Patent Box regime to drive innovation, retain high-value IP in the UK, and position themselves at the forefront of global industrial growth. We therefore expect to see the number of Patent Box claimants rising in the next year.”