Is Patent Box achieving its ambitions?

26 September 2016

Patent Box was introduced in April 2013 to incentivise and reward the active exploitation of patented technology in the UK. This is essentially to promote economic activity and employment. It effectively provides a 10% tax rate for UK companies that are exploiting patented IP rights.  

HMRC have released claim statistics for the first time showing just 700 claims submitted with a total value of £342m. However, it is good to see that the regime has attracted micro, small & medium size companies – who make up over 66% of claims in number. 

Against a £1bn annual budget - which was reduced to £600m for this first year as patent box phases in – the statistics are somewhat underwhelming. 

I would cite three key reasons for the lower than perhaps anticipated number and value of claims, namely: 

- Because patent box is given as a tax relief, companies need taxable profits in the year to benefit. A challenging economic environment coupled with some one-off tax adjusting items have deterred companies from claiming; 

- Complex businesses have been put off by the need to map patents to qualifying income as this data had never been required before. Once mapped, later years claims are relatively easy; 

- Uncertainty over the future of the regime due to a review of IP regimes globally, which has only recently concluded with a positive outcome. 

There are provisions within the legislation to make the regime more generous – the question is whether and when Government will use them. Arguably the statistics suggest sooner rather than later! 

Finally, don’t forget that for a company with a 31 December year end, 2014 claims must be filed by the end of 2016. Time to get cracking! 

If you have any questions please get in touch with me or your regular PwC contact.

 

Angela Browning

e: angela.browning@uk.pwc.com

p: +44 1509 604 274

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