HMRC have released the latest patent box statistics which yet again show the majority of patent box relief is going to large companies. This doesn’t have to be the case, unlike R&D tax reliefs the rate of relief available under patent box is the same for all companies regardless of size.
The patent box enables all eligible companies to benefit from an effective 10% rate of corporation tax arising from patented technology and many businesses have achieved significant tax savings since its introduction in April 2013.
The latest statistics from HMRC show there has been a decrease in the number of companies making patent box claims with a total of 1,510 claimants in 2021 – 2022 compared to 1,610 claimants in 2020 -2021. Whilst the number of claimants has decreased, the value of relief being claimed has actually increased from £1,196 million to £1,363 million in 2021-2022 primarily driven by large companies claiming more tax relief on average.
As in the previous years, whilst Large companies only make up 24% of the total claimants, they are expected to claim 94% of the total relief for 2021-2022, whilst Medium and Small sized companies (who collectively make up 53% of total claimants) are only expected to claim 6% of the total relief for the 2021-2022 period.
As may be expected there is a concentration of claimants from groups in the manufacturing sector accounting for 44% of the total relief claimed. The largest amount of relief also continues to be claimed by London based companies (this analysis is based on the taxpayer’s address given to HMRC for tax purposes).
Surprisingly given the increase in corporation tax rate to 25% from 1 April 2023 whilst the number of companies choosing to elect into patent box grew marginally in 2020-2021 HMRC expect this to drop in 2021-2022.
The patent box is a valuable relief for businesses of all sizes, providing a 15% tax saving on eligible profits. If you want to understand whether patent box could benefit your business Wilson Partners Limited can help.
