On 14 September 2017 the UK government published statistics in relation to the patent box legislation introduced from 1 April 2013. These statistics can be used by the government to assess the benefit to the economy from uptake of the tax relief, compared to the cost, and can assist in future tax policy decisions. As there is a two year time limit after the year-end for claiming the relief the latest statistics relate to 2014/15.

The patent box regime applies a lower 10% corporation tax rate to profits attributable to patents and similar forms of intellectual property (IP). The relief is delivered by means of an additional deduction for tax purposes based on the level of IP profits, therefore reducing the tax paid on those profits to the level of the lower 10% rate. The patent box relief was phased in over four years with the full benefit only being given for the first time in relation to 2017/18.

Changes were made to the patent box regime in 2016 to ensure that it complies with OECD recommendations on the nexus approach. Also the second Finance Bill of 2017 contains provisions to ensure that where research is carried out by two or more companies in collaboration under a cost sharing arrangement the companies are treated in the same way for purposes of patent box relief as they would be if the research and development had been arranged differently.

The statistics show that in 2014/15 a total of 1,135 companies (828 in 2013/14) claimed patent box relief and the total value of the claims was GBP 651.9 million (GBP 365.5 in 2013/14).

Of the total claimant companies in 2014/15 305 were classified as large companies and they claimed 94.6% of the total relief. 275 claimants were medium sized, claiming 4.1% of the patent box relief. 285 were small companies and they claimed 0.4% of the relief; and 255 were micro companies, claiming less than 0.1% of the relief. (Some of the companies are not included in these statistics). The company sizes are based on the EU size classification.

Of the total number of companies claiming patent box relief in 2014/15 615 were classified as manufacturing companies and 220 were classified under “Wholesale and Retail Trade, Repairs”.  The highest amount of the relief was claimed by companies classified under manufacturing, which claimed 50.7% of the total relief. It should be noted however that companies may engage in more than one type of economic activity.

The regional breakdown shows that 200 of the claimant companies were located in the south east; 130 in the east of England; 115 in the west midlands;  115 in London; 115 in Humberside; 110 in the north west; 100 in the south west and 90 in the east midlands. The remaining claimants were in the north east of England, Scotland, Wales and Northern Ireland. The most relief (GBP 363.1 million) was claimed by companies in London. It should be noted however that many companies may have a single head office address for tax purposes although they may have operations throughout the country.