It’s patently clear… Patent Box tax relief is on the rise!
The latest statistics have been published by HMRC, and it is clear that more tax relief is being claimed by clients with intellectual property than ever before.
Although the actual number of claimants remains modest – only 1,600 companies claimed Patent Box tax relief between April 2022 and March 2023 – the value of relief claimed almost totalled £1.5 billion, making it one of the most attractive corporation tax reliefs currently available.
As a reminder, the relief is available to companies who hold valid intellectual property (mainly in the form of a British or European patent), and sell products or services that utilise the IP at a profit. The relief works by giving companies tax relief that is equivalent to paying tax at a rate of just 10%. With the main rate of UK corporation tax increasing to 25% in April 2023, this represents an extremely healthy tax saving for companies making large profits on patented products and processes.
Unsurprisingly, the main beneficiaries of this scheme are large companies, broadly defined as organisations with over 250 employees and turnover exceeding €50 million (£41.6m). Even though only one-quarter of claimants in 2022-23 were large companies, the relief claimed by these enterprises constituted 94% of all relief claimed. As such, the average value of Patent Box tax relief claims made by large companies exceeded £3.3m in the tax year.
Despite the disparity, the average claim value for all other companies (i.e., SMEs) still stands at £68,900, the highest average saving since the scheme began in 2013. It is highly anticipated that this figure will rise again in 2023-24 due to the main rate of tax increasing in the period.
Companies are often dissuaded from applying for patents because of the prohibitive costs of application – the average cost of obtaining a UK patent is often quoted at around £10,000. However, given the potential tax savings that are available, and the fact that a patent can last for up to 20 years, it could well be worth considering your product development portfolio and ascertaining whether you have any novel and/or inventive developments that are not yet in the public domain.
An initial discussion with a Patent Attorney will generally guide you as to whether there is scope to apply; if you are unsure or need further guidance or support on your Patent Box journey, email hello@yes.tax today.
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