Why would only 5% of companies making R&D claims claim Patent Box too?
September 19, 2017
By Angela Browning
HM Revenue & Customs (HMRC) released its annual statistics regarding Research & Development (R&D) credits and Patent Box claims on 14 September 2017, which make for interesting reading!
The average Patent Box claim averages more than £575k of cash tax savings, which is more than five times the average R&D claim value. I would suggest many companies might wish to look again at Patent Box.
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, reduced from the headline corporation tax rate of 19%.
The latest statistics show that the number of companies making Patent Box claims increased to 1,135 companies, up by around 40% on the prior year. The marked increase in claims is positive, showing increasing uptake as the regime phases in. But the number of claimants makes up just 5% of those making R&D claims, suggesting large numbers are still missing out.
Of course early stage development companies might not be expected to claim if they are pre-revenue or pre-profit generation. There will be others who do not file patents to protect their intellectual property (and thus do not qualify) and a few that cannot claim for technical reasons. Even taking those into account, in my view, these statistics unequivocally suggest that many companies are missing out.
In particular, I would point to over 10,000 companies in the manufacturing and information & communication sectors - perhaps in part due to the myth that software cannot be patented in the UK. And early claimants in both sectors have paved the way for later claimants to make similar claims more easily.
On a more positive note, it is reassuring to see that the number of claimants is spread broadly, with around a third of claims made by each of large, medium and small size companies.
Finally, don’t forget that for a company with a 31 December year end, 2015 claims must be filed by the end of 2017. Electing in for 2015 could enable those companies to claim under the old regime too until 2021 (thus minimising the complexity of moving to new Nexus based claims). Time to get cracking!
If you have any questions please get in touch with me or your regular PwC contact.
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