The patent box legislation allows companies in the UK to apply a lower corporation tax rate to profits earned from qualifying patented inventions and specified equivalent types of intellectual property. The relief was first introduced from 1 April 2013 and the full relief was phased in between 2013 and 2017. From 1 April 2017 a 10% tax rate is available under the patent box legislation.

The patent box relief must be claimed by companies within two years after the end of the accounting period when the relevant profits arise. This means that the full statistics for 2017/18 have only recently become available and are presented in HMRC’s publication, together with some partial statistics for the 2018/19 fiscal year.

The patent box tax relief is intended to increase the level of patented IP developed in the UK; and encourage companies to develop and commercialise new and existing patents in the UK. The relief also encourages companies to manufacture and sell innovative products and services from the UK. The aim is to locate the high-value jobs associated with the development, manufacture and exploitation of patents in the UK.

In the 2017/18 tax year a total of 1,305 companies claimed patent box relief, claiming total relief of GBP 1,101 million. Of the companies claiming relief in 2017-18, 28% were classified as large companies, but 92% of the relief claimed in the year was claimed by these companies. The value of relief claimed increased year on year while the patent box relief was phased in from 2013/14 to 2015/16 this trend has continued in 2016/17 and 2017/18 when full relief has been available.

Of the companies claiming relief in 2017/18, a total of 715 were in the manufacturing sector (including pharmaceuticals) and these companies accounted for 30% of the relief given in the year. Only ten companies in the financial and insurance sector claimed patent box relief but they claimed 34% of the total relief given. Many companies carrying out research and development also manufacture their products or sell them to wholesale or retail customers; and this explains the significant claims for patent box relief from those sectors, amounting to more than 200 in 2017/18. As might be expected, claims for patent box relief are also common from companies within the professional, scientific and technical sectors which made more than 100 claims for relief.