We reported in July 2016 on the closing of the Patent Box as we knew it. In that report we gave some broad-brush statistics on the uptake, and the amount of relief claimed.
HMRC have now released the statistics for the first full year of the Patent Box, the 2013 / 2014 tax year. The rules of the Patent Box mean that companies can back-date their claims up to two financial years, and so this is the first opportunity for HMRC to release statistics for a full year. The HMRC report can be found here.
The statistics show that 700 companies claimed £342.9 million of relief. These numbers were similar to those reported by us in July 2016, but at that time we had no further information on the breakdown of the relief claimed based on company size, or what the median value of the relief claimed might be.
It turns out that by far the majority, over 95%, of the relief claimed was by ‘large’ companies (>250 employees, and >£50 million turnover). This is despite the fact that only just over 30% of the companies who have sought relief were classified as ‘large’. That makes for an average of a little over £1.45 million relief for each ‘large’ company.
If you look at the statistics for ‘small’ companies, there were 170 claimants who averaged just over £17,500 relief. A stark contrast, and it looks like for small companies, having fewer than 50 employees and a turnover between £2 million and £10 million, the value of the Patent Box is minimal.
Even looking at ‘medium’ companies, of which there were 175 claimants, the average relief was just £67,500. ‘Medium’ sized companies are those which have between 50 and 249 employees and a turnover of between £10 million and £50 million. Nevertheless, that £67,500 may well be sufficient to fund a worldwide patent portfolio for a new invention; perhaps not to be sniffed at, but nothing in comparison to the relief claimed by the ‘large’ companies.
Obviously, each case should be assessed on its own merits, but it looks like the amount of relief available is very roughly proportional to the turnover of the company. However, one might imagine that the internal overheads associated with the Patent Box claim, and the accountancy fees that will be incurred, would not be proportional. This may well skew the Patent Box towards larger companies.
Is this what the UK Government was aiming for? Quite possibly yes. The aims were to increase the level of patenting of IP developed in the UK; manufacture and sell those products in the UK; and encourage companies to locate the high-value jobs associated with the development in the UK. Although large companies would very likely protect their IP in any event, let us hope the Patent Box is at least a factor in their decision making process when considering where to manufacture, and where to locate their R&D subsidiaries.
As ever, we will keep you informed of any updates that may be of interest.
This article is for general information only. Its content is not a statement of the law on any subject and does not constitute advice. Please contact Reddie & Grose LLP for advice before taking any action in reliance on it.