Are companies missing out on patent box tax savings?

October 24, 2019

by Emma Richards Senior Manager, PwC United Kingdom

Email +44 (0)7872 005192

Companies exploiting patented technology in the UK have been able to benefit from significant tax savings since the introduction of the patent box in 2013. The patent box effectively provides a 10% rate of corporation tax arising from patented technology.

Latest statistics from HMRC  indicate there’s a small increase in the number of patent box claims with a total of 1,170 companies making claims in 2016-2017 compared to 1,160 in 2015-2016. The value of relief being claimed has continued to increase year on year to £1.35m which can partly be attributed to the phasing in of the patent box benefit.

More than 31% of the companies claiming in 2016-2017 were ‘large’ accounting for 95% of the relief claimed.  The manufacturing sector (including pharmaceuticals) remained the largest claimants with more than half (55%) of the companies that claimed coming from this sector.

The number of claimants varies significantly by region with the South East having the highest number of claimants (17%) with the lowest being in the North East (3%).  The statistics also show that as in the prior year the claims of companies in London are higher in value accounting for more than half (51%) of the total relief in 2016-2017.

The European Patent Office’s statistics show that there has been a 63% increase in EU patents granted to UK companies over the period from 2014 to 2017 compared to only a 3% increase in the number of companies claiming patent box over the same period. This discrepancy raises the question of whether companies are missing out?

Companies only require one eligible EU or UK patent to enable them to access the regime and potentially benefit from a lower 10% rate of tax on eligible profits.

Some companies may have been put off claiming due to the perceived complexity of the regime, however, given the formulaic nature of the calculation, it can be a straight-forward process to make a claim once an established approach has been put in place.

Patent box can be a valuable relief for many companies if you would like to speak to a PwC specialist about patent box eligibility and how to optimise your claim please contact us at Rachel Moore, Adrian Gregory, Vinod Keshav, or Emma Richards.

by Emma Richards Senior Manager, PwC United Kingdom

Email +44 (0)7872 005192