Patent Box take-up: What has changed since the beginning?

The value of Patent Box tax relief has passed £2 billion for the first time, while the number of companies using the scheme is also starting to rise after several years of little movement.

The latest figures from HM Revenue & Customs (HMRC) show that 1,735 companies are projected to have elected into Patent Box in 2024/25, receiving £2.283 billion in relief.

Go back to 2013/14 when the Patent Box scheme started, the picture looked very different. In that year, 835 companies were elected into the scheme, and the value of relief was only £376 million.

Most of the growth in take-up happened during the early years of the regime, followed by a plateau in recent years. But the latest figures now show two consecutive years of significant growth in the tax relief claimed.

What HMRC cannot tell us is how many companies could potentially benefit from Patent Box tax relief but are not making use of the regime.

Thomas Gibb, Executive Director at Murgitroyd, comments:

“One thing we regularly see when speaking to businesses is a tendency to think about patents in terms of the finished product, not what sits inside it. A business might assume Patent Box isn't relevant because they don't have a large patent portfolio.”

“In reality, it's often a specific technical feature or process within that product that turns out to be patentable, and that can be enough to bring the associated profits into scope.”

Relief has grown much faster than take-up #

While the number of companies using Patent Box has roughly doubled since 2013/14, the value of the tax relief has increased more than six-fold.

The increase in value should not, however, be read simply as a surge in Patent Box take-up.

The main rate of Corporation Tax increased from 19% to 25% in April 2023, while the Patent Box rate remained at 10%. HMRC identifies this as a significant factor in the recent increase in tax relief.

Many companies had accounting periods that crossed the rate change during 2023/24. This makes 2024/25 the first full year with the 25% main Corporation Tax rate against the 10% Patent Box rate.

HMRC also points to an increase in eligible profits, although it says this partly reflects a recovery from unusually low eligible profits in 2023/24.

Patent Box is not just for businesses with large patent portfolios #

The latest figures from HMRC also show that the value of Patent Box tax relief remains heavily concentrated among larger companies.

Large companies account for 28% of those projected to elect into the regime in 2024/25, but 95% of the relief. The 145 companies receiving the most relief account for 92% of its total value.

But that also means around seven in ten companies using Patent Box are SMEs.

A business does not necessarily need a large patent portfolio for Patent Box to be relevant. Subject to the qualifying requirements, a patented feature within a wider product or process may be enough for profits associated with that product or process to benefit from the scheme.

This is where businesses can potentially overlook opportunities.

A manufacturer, for example, may see the value in the finished product rather than an innovative component or process within it. A technology business may have developed a new technical feature without initially considering whether it could be patented.

Identifying those innovations early gives a business the opportunity to consider whether patent protection makes commercial sense and, where appropriate, whether Patent Box tax relief could add to that value.

Catherine Bonner, Executive Director, adds:

“I'm seeing more and more clients realising where Patent Box claims can be highly beneficial, and the opportunity isn’t limited to physical products. We’ve helped businesses protect processes and technologies that enable services to be provided, where the associated income can potentially qualify for Patent Box tax relief as well.”

Patent Box starts before the tax return #

Since Patent Box is a tax relief, tax advisers have an important role in determining eligibility and calculating qualifying profits. But the IP decisions that can enable a business to access the scheme happen much earlier.

That starts with identifying potentially patentable innovation and deciding what is worth protecting.  Such innovation could even be a company's trade secret up to now, but its value in achieving Patent Box tax relief for the next 20 years could outweigh the value of the innovation being kept secret.

Timing matters. Publicly disclosing an invention before an appropriate patent application has been filed can affect the ability to secure patent protection.

For businesses investing in R&D, that makes it worth looking beyond the obvious question of whether they already own patents.

What new technical features, products or processes are being developed? Is potentially patentable innovation being identified consistently? And are the IP and tax teams speaking early enough to understand whether Patent Box could be relevant?

These conversations can be worthwhile for businesses with established patent portfolios, but also for those that have never considered patent protection before.

Is there still untapped Patent Box potential? #

More than a decade of HMRC data shows how far Patent Box has come.

After several years of limited growth, take-up is moving again.

But there is one figure the HMRC statistics cannot provide: the number of innovative businesses that could potentially qualify but have never considered doing so.

For those businesses, the starting point is not necessarily a tax calculation. It is understanding what innovation exists within the business, whether it can and should be protected, and what commercial benefits that protection could bring.

Murgitroyd works with businesses to identify potentially patentable innovation and develop patent strategies that support their wider commercial objectives, working alongside tax advisers where Patent Box tax relief forms part of the picture.

Could your innovation support a Patent Box claim? Speak to our team about identifying potentially patentable technology within your products and processes, and how patent protection could support your Patent Box strategy.