Tax relief claimed under UK patent box nearly doubles in second year

More than 1,100 companies successfully claimed £651 million ($883 million) in tax relief under the UK’s patent box scheme during its second year of existence, government statistics show.

This is nearly double the amount claimed in the scheme’s first year (£365.5 million), and there was an increase of 37% in the number of companies claiming.

Launched in April 2013, the patent box allows companies to apply for a lower rate of corporation tax (10%) on profits earned from products protected by patents and other intellectual property.

Currently, the standard rate of corporation tax is 19% but it was 20% during the second year of the patent box (2014 to 2015).

Just over a quarter of the companies were classified as “large”—together they claimed £616.6 million of relief under the scheme (94.6% of the total).

Companies in London claimed the most relief (£363.1 million, or 55.7%), while companies in Northern Ireland claimed the least (£4.3 million, or 0.7%).

The number of claimants varied by region, with the highest number located in the South East (17.6%) and the lowest in Northern Ireland, Wales and the North East (3.1% of the total).

Matthew Smith, partner at Mewburn Ellis, added that the statistics are encouraging.

“I fully expect the trend to continue, with more and more companies taking advantage of the increased tax reduction now available. Of course, these statistics are actually a few years old so it is likely we will witness a similarly large increase in claimants and tax savings in the near future,” he said.

Between 2014 and 2015, most companies that applied for relief were in the manufacturing sector (54.2%), followed by the wholesale and retail trade and repairs sector (19.4%).

Companies in the manufacturing sector claimed the highest value of relief under the scheme (£330.4 million, or 50.7% of the total).

According to Smith, it’s unsurprising that certain sectors benefit more, as the requirements for the patent box scheme mean it can be easier to get patents in some fields than others.

“However, it’s really promising to see significant uptake outside London, and particularly amongst small and medium-sized enterprises,” he said.

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