HMRC has published its annual Patent Box relief statistics report, which tells us how many companies are using the Patent Box scheme and how much this costs the government.
The Patent Box incentivises companies to develop and commercialise their intellectual property (IP) in the UK, allowing them to apply a lower 10% Corporation Tax rate on profits from patented inventions or other equivalent IP. The figures from the annual reports are interesting because they give us a small insight into the health of UK innovation.
This year’s report shows a slight rise in the number of companies that have claimed. We can also see that the number of companies claiming in the 2022-23 tax year has been revised upwards from last year’s initial estimate of 1,600. This means that the number of companies using the scheme has actually grown every year since 2013-14 (previously, it looked like there had been a small decline).
The size of the growth, however, is disappointing. The take-up of the scheme has been virtually stagnant since 2018-19, meaning that Patent Box’s full potential still hasn’t been realised in the UK – especially as it’s mostly large businesses that benefit.
Below, we dive into the latest stats from the report, highlighting the key findings for Patent Box claims by industry and region across the UK.
Patent Box claims by year, 2013-14 to 2023-24
| Year | Number of companies | Amount of relief (£ million) | % Growth in Companies | % Growth in Relief |
|---|
| 2013–14 | 835 | 376 | N/A | N/A |
| 2014–15 | 1,175 | 658 | 40.72% | 75.00% |
| 2015–16 | 1,295 | 770 | 10.21% | 17.02% |
| 2016–17 | 1,425 | 1,047 | 10.04% | 35.97% |
| 2017–18 | 1,545 | 1,142 | 8.42% | 9.07% |
| 2018–19 | 1,575 | 1,164 | 1.94% | 1.93% |
| 2019–20 | 1,600 | 1,240 | 1.59% | 6.53% |
| 2020–21 | 1,610 | 1,198 | 0.63% | -3.39% |
| 2021–22 | 1,630 | 1,326 | 1.24% | 10.68% |
| 2022–23 | 1,640 | 1,449 | 0.61% | 9.28% |
| 2023–24 (projection) | 1,650 | 1,977 | 0.61% | 36.44% |
The initial estimates show that Patent Box elections for the 2023-24 tax year increased by 0.61% (which is just ten companies). As it’s a projected figure it’s possible that more companies will be added as returns continue to be filed and processed, but it suggests that growth in overall awareness and take-up of the scheme is still progressing at a very slow rate.
There has been a noticeable jump in the amount of relief claimed overall, rising by 36.44% in 2023-24 to £1,977 million. While this accelerates the trend of growth since the 2020-21 tax year, the government attributes this rise to the change in the main rate of CT, from 19% to 25% for the 2023-24 tax year.
The sharp rise in the amount of relief claimed is clearly visible in the chart below:
Patent Box data by company size 2023-24
| Company size | Number of companies | Number of companies as a percentage of total | Amount of relief (£ million) | Amount of relief as a percentage of the total |
|---|
| Large | 460 | 28% | 1,872 | 95% |
| Medium-sized | 455 | 28% | 77 | 4% |
| Small | 425 | 26% | 22 | 1% |
| Micro | 295 | 18% | 5 | <1% |
| Unknown | 15 | 1% | 1 | <1% |
| Total | 1,650 | 100% | 1,977 | 100% |
Of those claiming, 28% of companies are classed as large, 28% as medium, and 26% as small (the rest are either micro businesses or their size is unknown).
The numbers show that the biggest beneficiaries are large businesses (by far). In fact, large companies claim 95% of the total amount of relief via Patent Box. SMEs claim just 5% (4% medium-sized & 1% small).
This means that the vast majority of relief from Patent Box is received by just a small group of businesses, which own patents that generate the highest profits.
Patent Box data by industrial sector 2023-24
| Industry | Number of companies | Number of companies as a percentage of total | Amount of relief (£ million) | Amount of relief as a percentage of the total |
|---|
| Agriculture, Forestry and Fishing | 30 | 2% | 3 | <1% |
| Mining and Quarrying | 10 | 1% | 1 | <1% |
| Manufacturing | 1,000 | 61% | 816 | 41% |
| Electricity, Gas, Steam and Air Conditioning Supply | | | | |
| Water Supply | 15 | 1% | | |
| Construction | 60 | 4% | 5 | <1% |
| Wholesale and Retail Trade | 165 | 10% | 125 | 6% |
| Transportation and Storage | | | | |
| Accommodation and Food Service Activities | | | | |
| Information and Communication | 75 | 5% | 187 | 9% |
| Financial and Insurance Activities | 5 | <1% | | |
| Real Estate Activities | | | | |
| Professional, Scientific and Technical Activities | 150 | 9% | | |
| Admin | 80 | 5% | | |
| Public Admin, Defence and Social Services | | | | |
| Education | | | | |
| Human Health and Social Work Activities | 15 | 1% | <1 | <1% |
| Arts, Entertainment and Recreation | 5 | <1% | | |
| Other Service Activities | 20 | 1% | 6 | <1% |
| Total | 1,650 | 100% | 1,977 | 100% |
The industry breakdown shows that Patent Box claims are still dominated by Manufacturing, which represents 61% of companies and 41% of the total amount of relief claimed in 2023-24.
Manufacturers drive Patent Box claims because they are heavily involved in developing new products and technologies. It’s therefore logical that they would choose 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.
Although the Information and Communication sector represents only 5% of companies claiming the relief, the relief claimed is proportionately larger, making up 9% of the total amount.
There are some gaps in the data (represented by blanks in our chart) as the figures have been held back due to confidentiality. For example, we know that 10% of claims came from the Professional, Scientific, and Technical Activities sector, but we don’t know how much relief this industry actually received.
Patent box data by UK region 2023-24
| Regions | Number of companies | Number of companies as a percentage of total | Amount of relief (£ million) | Amount of relief as a percentage of the total |
|---|
| East Midlands | 130 | 8% | 28 | 1% |
| London and East England | 345 | 21% | 1,292 | 65% |
| North East | 40 | 2% | 12 | 1% |
| North West | 170 | 10% | 81 | 4% |
| Northern Ireland | 75 | 4% | 25 | 1% |
| Scotland | 65 | 4% | 118 | 6% |
| South East | 255 | 16% | 128 | 6% |
| South West | 140 | 9% | 45 | 2% |
| Wales | 75 | 4% | | |
| West Midlands | 170 | 10% | 91 | 5% |
| Yorkshire and The Humber | 180 | 11% | 57 | 3% |
| Unknown | 5 | <1% | | |
| Total | 1,650 | 100% | 1,977 | 100% |
The regional data is skewed towards London as many head offices are based there. As this might not be where the actual economic activity takes place, it makes meaningful interpretation a challenge. There has also been a change in the way that the data is reported, with the combination of London and East England (which is also for confidentiality reasons).
It’s not surprising then that most companies that claimed were from London and East England (21%) and that they claimed the majority of relief (65%). This was followed by the South East region, who made up 16% of companies, although they claimed only 6% of the total relief.
The area with the fewest companies claiming is the North East (2%), which claimed just 1% of relief.
How Leyton can help
The Patent Box scheme offers a lower rate of Corporation Tax of 10% on profits from patents and trademarks. With the rise in the main rate of CT from 19% to 25%, the scheme is now more valuable than ever.
If you think you’re missing out, now is the perfect time to review your company’s IP strategy, to make sure that you’re taking advantage of this important government benefit.
Our team of experts can help to identify patents that match HMRC’s criteria for relief, liaising with patent attorneys to secure the necessary patents to help you unlock and claim the maximum available relief for your patents and IP.
Get in touch today
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