How many innovative SMEs are missing out on Patent Box relief?

The latest set of annual statistics from HM Revenue and Customs (HMRC) show that, unlike as estimated last year, the number of companies elected into Patent Box actually marginally increased in the tax year 2021 to 2022 compared with the previous year (to 1,630 from 1,610 companies).  This means that the year on year increase in companies from tax year 2013 to 2014 continues, albeit more gradually from tax year 2017 to 2018.

UK Patent Box enables companies to apply a lower rate of Corporation Tax in the UK to profits earned after 1 April 2013 from qualifying patented inventions and equivalent forms of intellectual property. This is designed to encourage companies to keep and commercialise intellectual property in the UK.  See my previous article for a bit more detail.

It is projected that the value of relief claimed under the Patent Box went up from £1,327 million in the tax year 2021 to 2022 to £1,469 million in the tax year 2022 to 2023.  Similarly to the previous year, the increase in value of relief in tax year 2022-2023 was primarily driven by large companies claiming more tax relief on average.  It is estimated that 25% of companies were classified as ‘Large’ and accounted for most of the relief claimed (94%). 

Considering the relatively high number of SMEs in the UK, and that it is estimated that Medium and Small companies make up only 27% and 26% respectively of companies claiming relief in tax year 2022-2023, it would appear that there could be an opportunity for further innovative SMEs to benefit from the Patent Box.  There may be a variety of reasons that this is not being done, e.g. due to a lack of awareness, a perceived complexity of the Patent Box system, or that they consider that what they are doing is not inventive.

However, investigating this further, and taking advice from relevant professional advisors, may ultimately result in significant financial benefit and help business growth for these companies.  For example, engaging a patent attorney to assess Intellectual Property (IP) assets and IP opportunities (e.g. potentially utilising the UKIPO IP Advance scheme) may identify patentable technologies and processes that have not yet been protected (and could be used for Patent Box). 

For more information on how we can help to protect your Intellectual Property and derive further benefits from doing so, please get in touch.