Patent Box: A Year in Review

On 14 September 2016 HMRC published a summary of the uptake statistics on the Patent Box for the financial year 2013-4, the first year of operation of the scheme. This shows that tax savings were claimed valued at £342.9 million. The figures are broken down by company size, using EU size categories, micro-small-medium-large, showing that over 95% of the total savings were by large entities. The limited uptake by smaller companies is likely due primarily to the additional expenses for data collection and reporting necessitated by the rules.

It may be expected that the savings will be higher in subsequent years. There are serveral reasons for this expectation, one being that the tax rate for entitled profits tapered in over five years and another being increased knowledge of the system by companies and their advisors as time goes by.

As we have previously noted, the scheme has been adapted from July 2016 to comply with the G20 Base Erosion and Profit Shifting (BEPS) initiative, to focus on entities investing in R&D conducted in UK. The new rules will still apply to high proportions of profits of the large companies that have taken advantage of the original scheme. It is worthwhile for all IP owners to consider whether they could make savings in their UK Corporation Tax bills by electing into the Patent Box.

For advice on whether you may be entitled to such benefits, please contact Helen Jones at helen.jones@gje.com.