This is the measure, introduced in 2013 to encourage more investment in research and development, which entitles UK businesses to pay corporation tax at a rate of 10% on profits from any UK or certain EU patents.
The amount they saved rose by 17% compared to the £750m saved in 2015. This was despite the bureaucratic changes imposed on the UK government by the EU in July last year after some member states complained that the tax break did not comply with EU state aid rules.
Moore Stephens believes that Brexit will actually boost the use of tax breaks. As partner Steven Levine says, “Brexit represents a real opportunity for the UK to give R&D investment a shot in the arm by a sensible stepping up of tax breaks”.
“Tax breaks in areas like R&D should then be able to feed through to a higher overall tax take from improved corporate profits and a higher corporation tax take.”
He also suggests that making the Patent Box tax break more attractive could encourage more European companies to move R&D jobs to the UK post-Brexit. This would not only increase employment in the UK but also lead to higher tax receipts through PAYE and NIC.
However, to do so, the UK government will need to simplify the application process, reduce the criteria for eligibility and get rid of the increased administrative requirements that were introduced on the back of the recent changes.
“For now, the Patent Box in its current form is here to stay,” he adds. “The good news is that, despite its shortfalls, businesses can make significant savings through the scheme.”
Over the four years since the Patent Box scheme was first introduced, businesses have saved a total of £2.67bn.