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28 September 2018Patents

UK Patent Box claims jump to £942.5m in value

Companies claimed £942.5 million ($1.23 billion) in tax relief under the UK Patent Box in the fiscal year 2016–17, an increase of 25% year on year, according to newly-released data.

The 2016–17 statistics, released for the first time yesterday, September 27, by HM Revenue & Customs (HMRC), are not complete owing to a time lag in reporting the claims. This means the £942.5 million is likely to be revised upwards in the next report.

With the Patent Box, companies can apply a 10% rate of corporation tax to profits earned from their patented inventions, compared to the standard 20% rate during the period of the data in the report (2013–14 to 2016–17). The current rate is 19%.

Companies can apply the lower rate to profits earned after April 1, 2013, when the relief was phased in; the Patent Box’s full benefit has been available since April 1, 2017.

The latest statistics show that the value of relief claimed in fiscal year 2014–15 was £652.2 million, before it jumped to £754.3 million the next year (2015–16). Based on the partial data available for 2016–17, the value for that period currently stands at £942.5 million.

The 2016–17 data is incomplete because companies have two years after the relevant accounting period to notify HMRC if they wish to claim relief from profits gained in that period. It also means that a complete set of data for the 2015–16 fiscal year has only just become available.

According to the latest report, the value of relief claimed has risen year on year since 2013–14. Likewise, the number of companies filing claims has increased, with the exception of 2015–16 to 2016–17, although the figures are also likely to be revised upwards.

“Large” companies have dominated, accounting for 95.5% of relief claimed in 2015—16 and already 96.3% in 2016–17. Businesses from the manufacturing sector have tended to take the lion’s share of relief claimed, leading the way in 2015–16 (48.4%) and 2016–17 (37.1%). The category of “professional, scientific and technical activities” followed in second in both periods, with 12.1% and 15% respectively.

The influence of large companies came despite their accounting for only around a quarter of the total claimants in both 2015–16 and 2016–17, with medium, small and micro businesses also representing around 25%.

Perhaps unsurprisingly, London was the dominant region for relief claimed, taking 50.8% in 2015–16 and 55.3% in the next period.

According to the report, the Patent Box has several broad aims, including boosting the patenting of IP assets developed in the UK and ensuring that new and existing patents are further developed and commercialised in the UK.

James Seymour, partner at IP law firm EIP in London, noted that the value of relief claimed in 2016–17 is on course to exceed £1 billion for the first time.

He added: “Data from the most recent complete financial year, 2015–16, shows that the benefits can be significant. However, the Patent Box is not only for large companies—those classed as small or medium accounted for almost half the total claimants, claiming on average more than £55,000 of tax relief each.”

HMRC said it plans to publish Patent Box statistics annually, with the next report due in autumn 2019.

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