Recent HMRC data shows that fewer companies are claiming tax relief under the Patent Box scheme. Are you one of them?

 

As of the end of September 2024, Her Majesty’s Revenue and Customs (HMRC) in the United Kingdom has published the most recent Patent Box Statistics for the financial year 2022-2023. The data reveals a modest increase in the total corporation tax relief granted, which rose to an impressive £1.469 billion. However, it is noteworthy that the number of companies actively utilizing this relief has declined.

Mise-en-scene

The origins of the Patent Box regime date back to 2012 when the UK government implemented a targeted corporation tax relief scheme. This initiative was designed to specifically benefit UK-based companies—often referred to as 'UK PLC'—engaged in the creation, development, and commercialization of new and innovative products and services protected by patents granted in the UK. The primary objective of this scheme is to incentivize and promote innovation by allowing qualifying companies to significantly reduce their corporation tax rate to a mere 10% on profits derived from their patented inventions.

 Latest HMRC Statistics

The recent statistics indicate a potential cause for concern regarding the diminishing number of claimants for the Patent Box relief. One possible explanation is the stricter scrutiny and enforcement measures introduced by HMRC concerning Patent Box claims. This shift aligns with the UK government's ongoing initiative to combat tax fraud and ensure compliance. Notably, the statistics show that there was an 18% decrease in first-time claimants compared to the previous financial year. A striking statistic reveals that large corporations accounted for a staggering 94% of all tax relief claims, which raises questions about the accessibility of the scheme for smaller businesses.

Another critical factor may lie in the widespread lack of awareness about the Patent Box scheme, particularly among small and medium-sized enterprises (SMEs). In challenging economic times, when many financial priorities demand the attention of Chief Financial Officers (CFOs), the intricacies of such tax relief options may not receive the attention they warrant. 

The Inevitable

The current statistics spark concerns about the ability of 'UK PLC to capitalize on this valuable corporation tax relief, especially in light of the increase in the standard corporation tax rate to 25% that took effect in April 2023. The opportunity to benefit from a lower annual corporation tax rate of just 10% represents a significant financial incentive for companies—one that merits serious consideration.

Questions arise regarding whether there is an issue related to the publicity of the scheme itself. Is the information surrounding the Patent Box sufficient to ensure that potential claimants are aware of its existence and benefits? Additionally, there may be misconceptions among businesses about the innovation threshold required to qualify for the relief. Many may mistakenly believe that their projects lack the requisite level of innovation necessary to warrant patent protection.

 Murgitroyd's Expertise

In light of these challenges, Murgitroyd has assembled a dedicated team of experienced Patent Attorneys who possess a deep understanding of leveraging the patent system to maximize benefits for companies seeking to claim Patent Box tax relief. Our specialists are committed to guiding businesses through the complexities of the patent application process, ensuring that they obtain the appropriate patent protection necessary for qualifying for Patent Box claims. Our expertise is designed to empower companies to make the most of this invaluable scheme and support sustained innovation within the UK economy.