We’re Going to Need a Bigger Box – Patent Box Tax Relief Continues to Grow

The value of relief claimed under the Patent Box scheme increased to £1.36 billion in the tax year 2021 to 2022 according to data from HMRC, representing a 14% increase in relief claimed from the previous tax year.

What is the Patent Box Scheme?

The Patent Box scheme encourages companies to keep and commercialise intellectual property in the UK by allowing them to apply a lower rate of Corporation Tax to profits earned from qualifying patented inventions and equivalent forms of intellectual property. The lower rate of Corporation Tax under the Patent Box scheme is 10% compared with the main rate of Corporation Tax, which ranges from 19% to 25% depending on the accounting period.

What the Data Shows

Whilst the overall value of Patent Box tax relief claimed increased in the 2021 to 2022 tax year, the number of companies elected into the scheme decreased from the previous tax year, down from 1,610 to 1,510. As such, an increase in the average claim size drove the increase in the overall value of the Patent Box scheme to companies. In the 2021 to 2022 tax year, the 275 companies benefiting most from the Patent Box scheme are expected to claim an average relief of around £5 million, with some companies making claims far above this level.

How the Scheme could Benefit your Business

The reduction in companies claiming Patent Box tax relief highlights opportunities for more businesses to take advantage of this generous scheme. Some companies may not be aware that they have patentable processes and technologies that would enable them to benefit from this system, either as part of an overall strategy to protect their IP or as a ‘standalone’ approach to increase tax efficiency. If you are a company that is innovating and developing new ideas, then there is likely scope to take advantage of the Patent Box scheme.

For more information on the Patent Box scheme, please see our previous articles about if you are eligible for the Patent Box scheme, and how to apply.

Alternatively, if you would like to know more about our Patent Box expertise, or to speak to one of our attorneys about how to use this scheme to benefit your business, please contact us.