Small businesses fail to take advantage of Patent Box relief

Only 700 claims equating to 4.6% of available relief were claimed between 2013 and 2014 – the first year of statistics available

Only 4.6% of available relief was claimed by small and medium-sized businesses on the Patent Box, according to HMRC’s most recent statistics.

Patent Box expert Kari Campbell has revealed that only 700 claims made between 2013 and 2014 – the first year of available statistics – compared to over 10,000 claims made for research and development tax relief over the same period.

Surprisingly, firms from many sectors usually characterised as innovative such as the information & communication, financial & insurance and real estate (25) and the professional, scientific & technical (65) made only a small number of claims.

Despite this, both sectors have high amounts of relief per claim at an average of £2.34m and £332,000 respectively.

Introduced to increase the development and level of patenting of intellectual property in the UK, businesses can pay a rate of corporation tax on any patent box profits earned after 1 April 2013 lower than the current 20% main rate.

Campbell commented: “Smaller businesses are often put off claiming tax relief available to them, particularly the Patent Box, due to the complexities of making the first claim and fears of getting it wrong.

“However, it should be emphasised that, despite recent negative press, the Patent Box is a government backed scheme designed to benefit those businesses within Britain who are making the effort to innovate products within the UK.”

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  1. Ed Round
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    The figures look a bit odd, but that may be due to the small sample size. It’s certainly early days in the process. But, a couple of observations. In order to claim Patent Box relief, you have to be making taxable profits, and many SMEs, particularly start-ups, may not be troubling the scorer on that point. Further, the Patent Box relief is pretty complex, and requires quite a substantial administrative investment which may be beyond the smallest business. Certainly, the main drivers behind the development of the relief were much bigger players, and, to some extent, the system has been designed with them in mind, not the smaller business. Finally, concerning the business categories , it’s probably no surprise that the lion’s share of relief has gone to businesses involved in manufacturing. The ICT and Finance category is a little broad, but I’m not surprised that finance companies have not achieved Patent Box relief – patent protection is rarely available for financial innovation – and many businesses categorised as ICT are actually media oriented and not really involved in technical innovation. So, perhaps fewer surprises in the results than might immediately be thought.