Under the patent box legislation in the UK companies can enjoy a lower rate of UK corporation tax on their profits earned from qualifying patented inventions and some other equivalent types of intellectual property.
The patent box relief was introduced from 1 April 2013, and gradually phased in so the full tax relief became available from 1 April 2017. Under the legislation a lower corporation tax rate of 10% is payable, as compared to the full rate which is currently 19%.
The statistical data released by the government relates to the year to 31 March 2019, with some projected statistics for the year to 31 March 2020. There is a time lag in the collection of the full statistics because companies are given a two-year period after the end of the tax year during which they can make a claim for patent box relief. The projected statistics relating to 2019/20 are based on the claims for relief made so far.
In 2018/19 a total of 1,405 companies claimed patent box relief and the value claimed in the year amounted to GBP 1,129 million. In relation to tax year 2019/20, a total of 1,160 companies have made claims for patent box relief so far and the total value of those claims amounts to GBP 1,031 million.
In 2018/19 large companies claimed most of the patent box relief, amounting to 92% of the total relief given, but of the total number of companies claiming relief only 28% were classified as large. It is estimated that in 2019/20 large companies will claim 92% a similar proportion of the relief.
In tax year 2018/19, 32% of the total amount of patent box relief claimed was from the manufacturing sector. This illustrates that many of the companies that carry out research and development also manufacture or sell their products through wholesale or retail outlets. Around 26% of the total relief claimed in 2018/19 was made by companies in the professional, scientific and technical sector. The relevant statistics for 2019/20 suggest that the majority of companies claiming relief will continue to be from these two sectors.
The UK patent box tax relief is intended to be an additional incentive for companies to increase the level of patenting of intellectual property developed in the UK, and to provide an incentive for new and existing patents to be further developed and commercialised in the UK. It is also an incentive for companies to manufacture and sell the resulting innovative products and services from the UK and to ensure that the high-value jobs involved in the development, manufacture and exploitation of patents are located in the UK.