The latest Research and Development Tax Credits and Patent Box statistics have been released today by HMRC. It’s encouraging to see a year-on-year increase in claims for R&D tax relief but once again, the growth in Patent Box is woefully behind. More businesses are using the R&D scheme, which is great. However, overall business investment in innovation has only seen a marginal increase.
Our recent research says that 85% of SMEs think innovation is key to the economy’s recovery from Covid-19 (but only 15% think the Government is doing enough to encourage innovation). We must not be lulled into a false sense of security – more R&D tax claims does not necessarily mean more innovation is happening as there was only an 8% increase in R&D expenditure identified.
If we don’t start seeing business spending on innovation rise in line with R&D claims, we risk the effectiveness of the scheme being called into question.
Leveraging Intellectual Property
Patent Box is equally important and there should be an intrinsic correlation between IP and R&D. £5.3bn was claimed in R&D tax credits in 2017-18, but only £1.1m was claimed under the Patent Box scheme, predominantly going to large pharmaceutical companies. Businesses are just not leveraging their intellectual property as an asset. Our research shows 83% of SMEs see the importance of commercialising IP, yet only 24% think this is the main point of a patent.
We are not seeing enough new patent applications in this country. This is a huge source of untapped funding for UK SMEs and could hold the key to building back better after Covid-19.