Mid-market firms miss out as large businesses dominate £2.3bn innovation tax break
Medium-sized businesses are missing out on one of the government’s biggest innovation tax incentives, with new figures showing large companies receive almost all of the benefit from the UK’s Patent Box regime.
The latest figures from HMRC show businesses claimed an estimated £2.28bn through Patent Box in 2024/25, up from £1.86bn the previous year. However, while large businesses are projected to account for just 28% of companies claiming the relief, they are estimated to receive 95% of its total value. By contrast, medium-sized businesses secured just 3% of the relief available.
The figures also reveal regional disparities. Companies in London and East England are projected to receive almost two-thirds (64%) of all Patent Box relief, while at the other end of the scale the North East, East Midlands and Northern Ireland are each estimated only to receive 1% of the total.
Patent Box allows companies to apply a reduced rate of corporation tax to profits generated from patented inventions and certain qualifying intellectual property. The relief is intended to encourage businesses to develop, commercialise and retain intellectual property in the UK.
Sarah Picken, director at S&W, commented: “While the beneficiaries of the regime are significantly skewed towards larger business, the average annual claim for a medium sized company is around £167,000 of tax savings, making Patent Box a significant opportunity for many businesses in the mid-market.
“Awareness appears to be one of the biggest barriers for mid-sized businesses. In our experience, the issue is often not a lack of innovation, but that businesses haven’t looked closely enough at whether their innovation can be patented or assume that accessing Patent Box is more complicated than it really is.
“For profitable mid-market businesses developing innovative products, processes or technology, there may be a sizeable opportunity sitting unnoticed between their R&D activity and the profits that innovation ultimately generates.
“Companies are able to make a claim up to two years after the end of an accounting period, so the final figures may yet paint a different picture.”
Patent Box data 2024-25 (projection) – source HMRC:
| Region | Amount of relief as a percentage of the total |
| East Midlands | 1% |
| London and East England | 64% |
| North East | 1% |
| North West | 3% |
| Northern Ireland | 1% |
| Scotland | 4% |
| South East | 10% |
| South West | 4% |
| West Midlands | 4% |
| Yorkshire and The Humber | 3% |
| Company size | Amount of relief as a percentage of the total |
| Large | 95% |
| Medium-sized | 3% |
| Small | 2% |
| Micro | <1% |
| Unknown | <1% |
| Total | 100% |