HMRC has recently published their updated Patent Box relief statistics report, which covers the number of companies choosing to elect into the Patent Box. The official statistics include the projected stats for the 2022-23 tax year based on estimates of what’s been claimed so far.
The Patent Box is a government initiative that incentivises companies to develop and commercialise their intellectual property (IP) in the UK by offering a lower rate of Corporation Tax of 10% on profits from patents or other equivalent IP. As such, it provides a small insight into the health of UK innovation.
Unfortunately, the most recent statistics show a slight decline in the number of companies claiming Patent Box relief – although, more positively, the amount of relief claimed overall has increased year-on-year for the past two financial years that we have data for. In this article, we look at HMRC’s most recent Patent Box relief statistics report, highlighting the key findings for Patent Box claims by industry and region across the UK.
Patent Box claims by year, 2013-14 to 2022-23
| Year | Number of companies | Amount of relief claimed (£ million) |
|---|
| 2013-14 | 835 | 376 |
| 2014-15 | 1,175 | 658 |
| 2015-16 | 1,295 | 770 |
| 2016-17 | 1,425 | 1,047 |
| 2017-18 | 1,545 | 1,142 |
| 2018-19 | 1,575 | 1,164 |
| 2019-20 | 1,600 | 1,240 |
| 2020-21 | 1,610 | 1,196 |
| 2021-22 | 1,630 | 1,327 |
| 2022-23 | 1,600 | 1,469 |
The initial estimates show that Patent Box elections are ever so slightly down, from 1,630 companies in 2021-22 to 1,600 companies in 2022-23 (a small 2% decline). Despite this, the total value of the relief claimed rose from £1,327 million in 2021-22 to £1,469 million in 2022-23 (showing year-on-year growth of 11%).
Looking further back, it’s clear that the number of companies taking up the Patent Box election has stagnated since 2018-19, although 2022-23 represents an all-time high in terms of the amount of relief claimed.
Patent Box data by company size 2022-23
| Company size | Number of companies | Number of companies as a percentage of total | Amount of relief claimed (£ million) | Amount of relief claimed as a percentage of the total claimed |
|---|
| Large | 410 | 25% | 1,387 | 94% |
| Medium | 435 | 27% | 48 | 3% |
| Small | 415 | 26% | 24 | 2% |
| Micro | 320 | 20% | 7 | <1% |
| Unknown | 25 | 1% | 3 | <1% |
| Total | 1,600 | 100% | 1,469 | 100% |
Of those claiming, 25% of companies are classed as large, 27% as medium, and 26% as small (the rest are either micro businesses or their size is unknown).
Large companies claim more tax relief on average. In fact, large companies claim 94%, with small companies accounting for just 2%, and medium companies just 3% of the total amount of relief claimed via Patent Box.
Patent Box data by industrial sector 2022-23
| Standard Industrial Classification | Number of companies | Number of companies as a percentage of total | Amount of relief claimed (£ million) | Amount of relief claimed as a percentage of the total claimed |
|---|
| A. Agriculture, Forestry and Fishing | 30 | 2% | 2 | <1% |
| B. Mining and Quarrying | 5 | <1% | – | – |
| C. Manufacturing | 975 | 61% | 609 | 41% |
| D. Electricity, Gas, Steam and Air Conditioning Supply | – | – | – | – |
| E. Water Supply | 10 | 1% | – | – |
| F. Construction | 65 | 4% | 4 | <1% |
| G. Wholesale and Retail Trade | 160 | 10% | 84 | 6% |
| H. Transportation and Storage | 10 | <1% | – | – |
| I. Accommodation and Food Service Activities | – | – | – | – |
| J. Information and Communication | 60 | 4% | 124 | 8% |
| K. Financial and Insurance Activities | – | – | – | – |
| L. Real Estate Activities | – | – | – | – |
| M. Professional, Scientific and Technical Activities | 130 | 8% | – | – |
| N. Admin | 80 | 5% | – | – |
| O. Public Admin, Defence and Social Services | – | – | – | – |
| P. Education | – | – | – | – |
| Q. Human Health and Social Work Activities | 15 | 1% | <1 | <1% |
| R. Arts, Entertainment and Recreation | 5 | <1% | – | – |
| S. Other Service Activities | 20 | 1% | 5 | <1% |
| Unknown | 20 | 1% | 1 | <1% |
| Total | 1,600 | 100% | 1,469 | 100% |
The statistics show that Patent Box claims are dominated by Manufacturing companies, representing 61% of companies claiming in 2022-23. They also claim 41% of the total amount of relief. This isn’t a surprise, as manufacturers are heavily involved in developing new products and technologies and would therefore seek to protect their R&D investments by patenting new products, technologies and processes.
This also explains why Wholesale and Retail Trade is the next largest industry, representing 10% of companies and claiming 6% of relief.
Also notable is the Information and Communication industry. While they account for just 4% of companies claiming, they claim 8% of relief.
Patent box data by UK region 2022-23
| Government Office Region (GOR) | Number of companies | Number of companies as a percentage of total | Amount of relief claimed (£ million) | Amount of relief claimed as a percentage of the total claimed |
|---|
| East England | 195 | 12% | – | – |
| East Midlands | 105 | 6% | 18 | 1% |
| London | 150 | 9% | 706 | 48% |
| North East | 35 | 2% | 8 | 1% |
| North West | 155 | 10% | 97 | 7% |
| Northern Ireland | 65 | 4% | 13 | 1% |
| Scotland | 65 | 4% | 86 | 6% |
| South East | 240 | 15% | 76 | 5% |
| South West | 145 | 9% | 76 | 5% |
| Wales | 70 | 4% | – | – |
| West Midlands | 165 | 10% | 42 | 3% |
| Yorkshire and The Humber | 175 | 11% | 32 | 2% |
| Unknown | 40 | 2% | – | – |
| Total | 1,600 | 100% | 1,469 | 100% |
It can be difficult to interpret regional data meaningfully as the information is based on the company address given to HMRC for tax purposes. This skews the data towards London as many head offices are based there – even though this might not be where the actual economic activity happens.
The area with the most companies claiming is the South East (15%), although they claim just 5% of relief. The area with the fewest companies claiming is the North East (2%), which claimed just 1% of relief.
How Leyton can help
Is your business thinking of claiming Patent Box Corporation Tax relief?
Our team of experts can help to identify patents that match HMRC’s criteria for relief. We’ll help you navigate the complexities of the scheme, allowing you to claim maximum relief for your patents and IP.
Get in touch today.
