Source: Gov.uk 

1. Main Points

• In the tax year 2019 to 2020, 1,395 companies claimed relief under the Patent Box, and the total value of relief claimed was £1,220 million. Broadly in line with last year’s projected values.
• Projected figures for the tax year 2020 to 2021 show that 1,535 companies claimed relief, with the total value of claims estimated to be £1,205 million.
• Of the companies that claimed in tax year 2019 to 2020, 28% were classified as ‘Large’, but these companies accounted for most of the relief claimed (95%).
• Over half (735) of the companies that claimed were in the Manufacturing sector, accounting for 32% of the relief.
• The number of companies claiming relief varies significantly across UK regions. The area with the fewest number of companies claiming relief was the North East (2% of the total in tax year 2019 to 2020), and the area with the most companies claiming was the South East (16%); although London-based companies claimed the largest amount of relief (46%).

2. Introduction

About these statistics

This is an Official Statistics publication produced by HM Revenue & Customs (HMRC). It provides information on the number of companies claiming relief under the UK Patent Box and the value of this tax relief from tax year 2013 to 2014 to tax year 2019 to 2020, and projected statistics on relief for tax year 2020 to 2021.

Section 1 gives a summary of the key Patent Box findings and statistics. Section 4 provides data broken down by company size, industry sector and UK region. Section 5 gives some background information about the Patent Box and how these statistics have been produced.

The amounts of relief claimed under the Patent Box have been rounded to the nearest £1,000,000 and the numbers of companies claiming the relief have been rounded to the nearest 5. Some data has been supressed to meet confidentiality requirements. Because of rounding and suppression some breakdown figures may not add up to provided totals.

These statistics are produced to the professional standards set out in the Code of Practice for Official Statistics (2009). For more information on the statistics produced by public bodies, please visit the UK Statistics Authority website.

HMRC Official and National Statistics can be found on the gov.uk website.

Who might be interested in these statistics?

This publication is likely to be of interest to policy makers in government, academics, research organisations, international bodies, the media and patent holding businesses.

People interested in this publication may also be interested in HMRC’s National Statistics publication on Research and Development tax credits.

3. Background

The UK Patent Box enables companies to apply a lower rate of Corporation Tax to profits earned after 1 April 2013 from qualifying patented inventions and equivalent forms of intellectual property. The relief was phased in from 1 April 2013 and the full benefit of the Patent Box has been available from 1 April 2017. The lower rate of Corporation Tax under the Patent Box is 10% compared with the main rate of Corporation Tax, which has ranged from 23% in 2013 when the Patent Box was introduced, to 19% in the years since 2017.

Companies must notify HMRC if they wish to claim relief under the Patent Box. This must be done within two years after the end of the accounting period in which the relevant profits and income arise. Given this time lag, a complete set of data for the seventh year of the Patent Box – covering the period 1 April 2019 to 31 March 2020, known as the 2019 to 2020 fiscal year – has only recently become available. These data are updated from last year’s release.

This release also includes projected statistics for the tax year 2020 to 2021. The tax year 2020 to 2021 figures will be updated based on a complete set of data in the next annual release (Autumn 2023). The projections have been made based on the amount of claims that have been made so far, and the previous’ years data of the amount of claims that are usually made later on.

4. Distribution of Patent Box data

4.1 Distribution by year

In tax year 2019 to 2020, 1,395 companies claimed relief under the Patent Box, and the total value of relief claimed was £1,220 million. Projected figures for the tax year 2020 to 2021, grossed up to account for later returns, show that 1,535 companies claimed relief, with the total value of claims estimated to be £1,205 million.

Over the period since its introduction the value of relief has increased as the rate has been phased in, with that growth slowing in 2017 to 2018 which is the first year where the relief is fully phased in. The number of groups claiming Patent Box relief has grown every year up until tax year 2019 to 2020, and based on partial data which has been projected forward for the whole year, we expect the number of companies claiming relief to increase again in tax year 2020 to 2021.

Figures 1 and 2 below display the total volume and value of claims from tax year 2013 to 2014 to tax year 2020 to 2021. Figures for tax year 2020 to 2021 show the projected finalised figure. The tables in Annex B also show the projections for tax year 2020 to 2021.

Figure 1: Number of companies claiming Patent Box relief from 2013-14 to 2020-21

Figure 2: Total relief claimed from 2013-14 to 2020-21

4.2 Distribution by company size

In tax year 2019 to 2020, large companies claimed 95% of the relief, but only 28% of the companies claiming were classified as large. In tax year 2020 to 2021, it is projected that large companies will continue to claim 94% of the relief. Company size breakdowns are based on the European Union Enterprise Size Classification (see Annex A), and a full table of results by company size can be found in Annex B.

4.3 Distribution by industry sector

Many companies that undertake research and development also manufacture and/or sell their products either wholesale or retail, which explains the contribution of these sectors to the Patent Box; in tax year 2019 to 2020, 32% of the total amount claimed was from groups in the manufacturing sector. Research and development is expected to be common within the ‘Professional, Scientific and Technical’ sector, with groups in this sector making up 35% of the total relief claimed in tax year 2019 to 2020. In tax year 2020 to 2021, projected figures suggest these sectors combined will continue to make up a majority of both the number of groups claiming and the total relief.

These sectors are based on the Standard Industrial Classification (SIC) 2007. More details on the SIC 2007 can be found in Section 5. Full sector breakdowns can be found in Annex B.

Entities can sometimes be reclassified between releases, which means that a company, and the claim value associated with that company, may appear in a different sector in this year’s release compared to previous publications.

4.4 Distribution by region

In tax year 2019 to 2020, London-based companies claimed the largest amount of relief (46%). It is projected that London will remain claiming the largest amount of relief (50%) in tax year 2020 to 2021. There is variation in the population of companies across the different regions in the UK. Therefore, the regional distribution of Patent Box relative to the Corporation Tax (CT) population will differ from the headline figures.

The geographic breakdowns shown in this section are based on the UK Government Office Regions (see Section 5 for more information). When interpreting these statistics, it should be noted that companies can have a single address for tax purposes (for example, a headquarters location) even though they may have operations across the UK. This analysis is based on taxpayers’ addresses given to HMRC for tax purposes so may or may not represent where the economic activity takes place. As such they should be treated with caution.

5. Background information

The UK Patent Box was introduced in the Finance Act 2012, effective from 1 April 2013, having been announced in the 2010 Corporate Tax Roadmap. It applies a lower rate of Corporation Tax (10%, as compared with a main rate of 19% in tax year 2019 to 2020) to profits attributable to patents and equivalent forms of intellectual property (IP). This is delivered by an additional deduction, based on the level of IP profits so that the benefit to the company is equivalent to that of a lower rate. The benefit was phased in, with companies fully benefitting from the 10% rate from 2017 to 2018.

The aim of the Patent Box is to provide additional incentive for companies to:

• increase the level of patenting of IP developed in the UK, and ensure that new and existing patents are further developed and commercialised in the UK
• manufacture and sell those innovative products and services from the UK
• locate the high-value jobs associated with the development, manufacture and exploitation of patents in the UK

In 2016 the government made changes to the design of the Patent Box to comply with a new international framework for preferential tax regimes for IP set out by the Organisation for Economic Co-operation and Development (OECD).

This means that the amount of profit from an IP asset which can qualify for the reduced 10% rate of Corporation Tax available through the Patent Box will depend on the proportion of the asset’s research and development expenditure incurred by the company.

Data sources and reliability of the estimates

The Patent Box statistics in this release are compiled using data collected from electronically filed company tax returns. The Corporation Tax computations, where relief under the Patent Box is claimed, are submitted to HMRC in iXBRL (electronic) format. This allows companies to electronically ‘tag’ their Patent Box claim so that the number and value of each claim can be extracted automatically.

Tagging errors

Some Patent Box claims do not have the correct iXBRL ‘tag’ applied to them. Further review and scanning of tax computation documents was therefore required to identify computations containing relevant terms such as ‘Patent Box’ or ‘Patent Relief’ that would otherwise be missed.

HMRC is currently working to improve and extend its electronic text reading capabilities to routinely ‘read’ all documents submitted as part of the company tax return. While this will make it easier to find Patent Box claims in future, we expect there to be little impact on the figures provided in this publication because of the manual review work and extra quality assurance undertaken in preparing the statistics.

All of the tax computations identified via the iXBRL ‘tagging’ or text reading processes outlined above were then manually reviewed to:

• ensure that the tags were used correctly for Patent Box claims
• extract the value of the claim if found by text reading and confirm the position in other years where there was no apparent claim
• ensure that when amendments to returns were made only the difference in amounts was recorded to avoid double counting

Industry sector information

Companies in HMRC’s data are allocated a Standard Industrial Classification (SIC) 2007 code that best describes a company’s primary economic activity.

However, some companies engage in more than one type of economic activity. The industry sector breakdown in this publication does not necessarily indicate where a company’s research and development activity takes place. For example, a company primarily doing manufacturing (and therefore allocated to the ‘Manufacturing’ sector) could also have a branch undertaking research and development activity in the ‘Scientific’ sector. For this reason, the industry sector information should be viewed as only a broad picture as to where activity takes place.

Geographic information

The geographic information in this publication is based on the addresses given by companies claiming relief under the Patent Box. The location of this address is not necessarily where a company’s research and development, manufacturing, or other activity takes place. Companies provide a Registered Office address to HMRC for communication purposes but can have business activities located in other UK regions.

Revisions to published information

The Patent Box figures are subject to revision. Although the majority of returns are finalised within two years of the end of the company’s accounting period, there are exceptional cases which can take longer. As a result, there is no specific point at which data for the latest year can be considered as complete and final. In practice, the statistics are revised to replace any figures marked as provisional in the previous release of the statistics. However, where the revision to a year is particularly small and would lead to the potential disclosure of individual companies, these revisions will be suppressed (based on our standard approach to statistical disclosure control) until a subsequent release.

Planned developments and changes

Frequency of publication

HMRC plans to publish these Patent Box statistics annually as each year of data becomes available from company tax returns.

Statistics alignment

Because of the way the Patent Box is designed, a complete set of annual data of the relief for any given year becomes available only after two years from the end of that given year. In the past this has meant that Patent Box statistics lag behind by at least one year compared to other tax statistics produced by HMRC.

To align Patent Box statistics with the rest of HMRC publications we have published provisional projected statistics for tax year 2020 to 2021 based on claims made up to and including June 2022. This is based on analysis of Patent Box claims made for previous fiscal years which shows that, on average, 88% of Patent Box claims are made by the end of the June of the second year after the end of the accounting period. The statistics will be updated based on the complete set of Patent Box claims relating to tax year 2020 to 2021 in the next annual release (Autumn 2023).

User engagement

HMRC is committed to providing impartial quality statistics that meet our users’ needs. We encourage our users to engage with us so that we can improve our National and Official Statistics and identify gaps in the statistics that we produce. Please see the HMRC Statistics ‘Continuous User Engagement Strategy’.

If you would like to comment on these statistics or have any enquiries, please use the statistical contacts named at the end of this section and on the cover page.

UK Statistics Authority assessment

This publication has yet to be assessed for compliance with the Code of Practice for Official Statistics by the UK Statistics Authority (UKSA). This means that the figures in this publication are not yet classified as National Statistics, but as Official Statistics.

UKSA is an independent body directly accountable to Parliament with the overall objective to promote and safeguard the production and publication of official statistics. It is also required to promote and safeguard the quality and comprehensiveness of official statistics and good practice in relation to official statistics.

Please refer to UKSA’s website for more details about the assessment process.

We aim to ready this publication for UKSA assessment in the future.

Contact points

Enquiries about these statistics should be directed to:

J Woods
KAI Direct Business Taxes
HM Revenue & Customs
100 Parliament Street
London SW1A 2BQ
Telephone: 03000 536786
E-mail: ct.statistics@hmrc.gov.uk

For enquiries relating to the Patent Box policy please contact:

J James
CT Innovation and Growth
Business, Assets and International
HM Revenue & Customs
100 Parliament Street
London SW1A 2BQ
Telephone: 03000 594901
E-mail: ct.statistics@hmrc.gov.uk

Media enquiries should be directed to the HMRC Press Office contacts listed on the front page of this release.

For general or other enquiries please refer to HMRC’s website.

6. Annex A: Company size definitions

The size of a company is based on the European Union Enterprise Size Classification as shown in the following table:

Table 1: Company size definition table

European Union Enterprise Size Classification	Turnover (€ million)	Total assets (€ million)	Number of employees
Micro	2	2	9
Small	10	10	49
Medium	50	43	249
Large	>50	>43	250+

 

The values shown are upper limits (except for the ‘Large’ category). To be classified as a certain size, a company must meet the employee limit and one or other of the turnover and total assets limits. Information on turnover, total assets and number of employees comes from various internal and external sources. Where this information is missing companies have been grouped into the ’Unknown’ category.

7. Annex B: Publication tables

Notes to the Tables:

If the proportion of later returns are the same as in previous years then the total value of claims for tax year 2020 to 2021 is likely to be around £1,205 million.

Amounts of the relief have been rounded to the nearest £1,000,000 and the number of companies have been rounded to the nearest five. Figures might not add up to totals due to this rounding.

A hyphen (‘-‘) indicates figures have been suppressed to meet confidentiality requirements.

The next update of these tables will be published in Autumn 2023. This will provide revised figures for tax year 2020 to 2021 and provisional statistics for 2021 to 2022.

Table 2: Claims by year

Year	Companies claiming under Patent Box	Relief claimed under Patent Box (£ million)
2013-14	830	362
2014-15	1135	649
2015-16	1160	749
2016-17	1170	1029
2017-18	1305	1101
2018-19	1405	1129
2019-20	1395	1220
2020-21 (projection)	1535	1205

 

Table 3: Patent Box data by company size 2019-20

Company size	Number of companies claiming relief	Number of companies as a percentage of total claiming relief	Amount of relief claimed (£ million)	Amount of relief claimed as a percentage of the total claimed
Large	390	28%	1161	95%
Medium-sized	345	25%	41	3%
Small	355	25%	14	1%
Micro	295	21%	–	–
Unknown	10	1%	–	–
TOTAL	1395	100%	1220	100%

 

Table 4: Patent Box data by company size 2020-21 (projection)

Company size	Number of companies claiming relief	Number of companies as a percentage of total claiming relief	Amount of relief claimed (£ million)	Amount of relief claimed as a percentage of the total claimed
Large	375	24%	1131	94%
Medium-sized	390	25%	47	4%
Small	400	26%	19	2%
Micro	350	23%	–	–
Unknown	15	1%	–	–
TOTAL	1535	100%	1205	100%

 

Table 5: Patent Box data by industrial sector 2019-20

Standard Industrial Classification	Number of companies claiming relief	Number of companies as a percentage of total claiming relief	Amount of relief claimed (£ million)	Amount of relief claimed as a percentage of the total claimed
A. Agriculture, Forestry and Fishing	20	1%	1	0%
B. Mining and Quarrying	–	–	–	–
C. Manufacturing	735	53%	388	32%
D. Electricity, Gas, Steam and Air Conditioning Supply	–	–	–	–
E. Water Supply	5	1%	0	0%
F. Construction	30	2%	–	–
G. Wholesale and Retail Trade	275	20%	65	5%
H. Transportation and Storage	10	1%	–	–
I. Accommodation and Food Service Activities	–	–	–	–
J. Information and Communication	50	4%	112	9%
K. Financial and Insurance Activities	10	1%	–	–
L. Real Estate Activities	–	–	–	–
M. Professional, Scientific and Technical Activities	170	12%	431	35%
N. Admin	55	4%	6	0%
O. Public Admin, Defence and Social Services	–	–	–	–
P. Education	–	–	–	–
Q. Human Health and Social Work Activities	5	0%	–	–
R. Arts, Entertainment and Recreation	–	–	–	–
S. Other Service Activities	15	1%	1	0%
T. Households	–	–	–	–
U. Overseas	–	–	–	–
Unknown	–	–	–	–
TOTAL	1395	100%	1220	100%

 

Table 6: Patent Box data by industrial sector 2020-21 (projection)

Standard Industrial Classification	Number of companies claiming relief	Number of companies as a percentage of total claiming relief	Amount of relief claimed (£ million)	Amount of relief claimed as a percentage of the total claimed
A. Agriculture, Forestry and Fishing	25	2%	1	0%
B. Mining and Quarrying	–	–	–	–
C. Manufacturing	800	52%	271	23%
D. Electricity, Gas, Steam and Air Conditioning Supply	–	–	–	–
E. Water Supply	5	0%	–	–
F. Construction	35	2%	–	–
G. Wholesale and Retail Trade	295	19%	97	8%
H. Transportation and Storage	10	1%	–	–
I. Accommodation and Food Service Activities	–	–	–	–
J. Information and Communication	55	4%	103	9%
K. Financial and Insurance Activities	10	1%	–	–
L. Real Estate Activities	–	–	–	–
M. Professional, Scientific and Technical Activities	185	12%	501	42%
N. Admin	70	5%	11	1%
O. Public Admin, Defence and Social Services	–	–	–	–
P. Education	–	–	–	–
Q. Human Health and Social Work Activities	5	0%	–	–
R. Arts, Entertainment and Recreation	–	–	–	–
S. Other Service Activities	15	1%	1	0%
T. Households	–	–	–	–
U. Overseas	–	–	–	–
Unknown	15	1%	–	–
TOTAL	1535	100%	1205	100%

 

Table 7: Patent Box data by UK region 2019-20

Government Office Region (GOR)	Number of companies claiming relief	Number of companies as a percentage of total claiming relief	Amount of relief claimed (£ million)	Amount of relief claimed as a percentage of the total claimed
North East	35	2%	7	1%
North West	140	10%	31	3%
Yorkshire and The Humber	140	10%	40	3%
East Midlands	105	7%	18	1%
West Midlands	155	11%	41	3%
East of England	170	12%	219	18%
London	130	9%	555	46%
South East	230	16%	166	14%
South West	135	10%	88	7%
Scotland	60	4%	29	2%
Wales	55	4%	14	1%
Northern Ireland	45	3%	12	1%
Channel Islands	–	–	–	–
Unknown	–	–	–	–
TOTAL	1395	100%	1220	100%

 

Table 8: Patent Box data by UK region 2020-21 (projection)

Government Office Region (GOR)	Number of companies claiming relief	Number of companies as a percentage of total claiming relief	Amount of relief claimed (£ million)	Amount of relief claimed as a percentage of the total claimed
North East	35	2%	–	–
North West	150	10%	34	3%
Yorkshire and The Humber	155	10%	33	3%
East Midlands	125	8%	19	2%
West Midlands	150	10%	17	1%
East of England	200	13%	186	16%
London	140	9%	602	50%
South East	245	16%	166	14%
South West	140	9%	55	5%
Scotland	70	5%	45	4%
Wales	65	4%	19	2%
Northern Ireland	55	4%	14	1%
Channel Islands	–	–	–	–
Unknown	15	1%	–	–
TOTAL	1535	100%	1205	100%