Research and analysis

Evaluation of the Patent Box

This report assesses the impact of the Patent Box investment in the UK.

Documents

Evaluation of the Patent Box

Details

The Patent Box is a tax relief designed to encourage companies to retain and commercialise intellectual property (IP) in the UK. It allows companies to apply a lower rate of Corporation Tax to profits earned from its patented (and similarly protected) inventions. Companies must elect into the Patent Box to apply the lower rate of Corporation Tax, which is 10%. This relief was introduced in phases from 2013 to 2017.

HMRC has pro-actively evaluated the wider economic impacts of the Patent Box to broaden the evidence base on effectiveness of tax reliefs. The wider economic impacts of the Patent Box have never been evaluated before.

Publishing this report will also directly address recent recommendations made by the National Audit Office (NAO) and Public Accounts Committee (PAC) for HMRC and HM Treasury to evaluate more tax reliefs and publish evaluations.

The evaluation suggests that the Patent Box has had a positive impact on business investment. There has been around a 10% increase in assets held by companies that use the Patent Box compared to similar companies that do not use the Patent Box since it was introduced.

This is not a complete measure of the relief’s effectiveness, however, as there may be benefits of companies commercialising intellectual property in the UK that do not show up as increased investment.

Published 17 November 2020