Tax relief goes begging

12 Oct 2020

Engineering capacity news posted by Andy Sandford

The total value of claims for tax relief under the UK’s Patent Box regime has increased, but only slightly, according to latest data sets released by HMRC. Whilst this is a positive indicator of investment in innovation, the number of companies making claims is still far lower than it should be, according to European intellectual property firm, Withers & Rogers.

The statistics show that 1,230 companies in the UK claimed £992 million in relief under the Patent Box regime in 2018-19 and these partial figures will be revised upwards as more data for this fiscal year becomes available. HMRC forecasts, based on the pattern of claims seen in previous years, suggest that the total value of claims for 2018-19 will be £1,130 million, up from £1,101 million in 2017-18 – an increase of a mere 2.6 per cent.

Michael Jaeger, partner and patent attorney at intellectual property firm, Withers & Rogers, said:

“The overall value of the claims submitted by companies under the Patent Box regime has been increasing year on year. However, the number of companies making claims is still lower than it should be.

“With the volume of patent applications made to the European Patent Office (EPO) by UK-based companies increasing 6.9 per cent in 2019 to 6,156, it is clear that businesses are investing in innovation and using their intellectual property rights to optimise their profits when bringing new technologies to market. However, some could be missing out on an opportunity to secure even more value by claiming tax relief on profits generated by their patented inventions.

“In particular, HMRC’s data indicates that SMEs1 are not taking full advantage of the scheme. While they accounted for 52 per cent of the total volume of claims, according to the partial data for 2018-19, they are only responsible for just 6 per cent of their total value.”

Manufacturers, including pharmaceuticals, are making the most claims, followed by businesses in the retail and wholesale sector. Some other sectors are making fewer claims than might be expected – for example fintech and the transport sector. The partial data for 2018-19 indicates that 645 manufacturers claimed tax relief under the Patent Box scheme, with a cumulative value of £272 million.

From a regional perspective, the data shows that by far the largest volume of claims are made by businesses in London and the South East, which could be partly due to the tendency of many businesses to have their registered office address in London. Other UK regions combined account for just 22 per cent of the total claims based on the partial 2018-19 data.

Michael Jaeger comments:

“Access to professional advisers who can help businesses to leverage the Patent Box scheme is critical and some smaller businesses may lack such resources. This is concerning as many start-up businesses are highly innovative and should be taking full advantage of the reliefs available.”