Annual figures released by HMRC show a substantial increase in the value of patent box and Research and Development (R&D) relief claims for 2016/17 and suggest there could be a reduction in claims for 2017/18.

The Patent Box allows companies to apply a lower rate (10%) of Corporation Tax to profits earned from qualifying patented inventions and intellectual property.

R&D tax credits either reduce a company’s corporation tax liabilities or result in a payment being made to the company by HMRC.

Patent box:

The number of companies claiming the patent box increased by 8% in 2016/17 but the value of those claims increased by nearly 40%, reaching an all-time high of £1,035million. This is just short of the £1.1billion per year predicted by the government before the relief was introduced.

  • Companies in the South East made the highest number of claims though London based businesses accounted for just over half of the total value of the relief claimed.
  • Large companies made up 31% of claimants but 92% of the relief.
  • Partial data for 2017/18 suggests a slight dip in the full year figures compared to 2016/17, especially given that the full benefit of the relief was only available from 2017/18.

R&D relief

R&D relief claims increased by 20% in 2016/17 with the total value of relief rising by 14% to £4.4billion. Partial data for 2017/18 suggests there may be a slight drop in the number of claims but an increase in the value of relief which is already at £4.3billion with some claims still to be filed and recent delays from HMRC in processing claims.

  • SME scheme claims made up 60% of the total claimed for 2016/17, with SME’s (under both schemes) making up almost 80% of the total.
  • The regional split favoured London and the South East with the East of England coming in a close third place.

It is encouraging that more claims continue to be made for both reliefs and that for R&D relief at least, the value of relief is continuing to grow despite the economic uncertainty of Brexit. It is to be hoped that this continues as these reliefs are valuable incentives for businesses investing in innovation and development.

Links to our guides:

R & D: SME Tax Credit scheme

R & D: Large Company Scheme (RDEC) Guide

Patent Box

Or see our special R & D & Patent Box zone

External links:

Patent Box relief statistics

Corporate tax: Research and Development Tax Credit