Can Patent Box Help Keep The Lights On?

The UK energy sector is undergoing a transformative shift, with innovations in renewable energy, carbon capture, and advanced drilling technologies driving progress. Patent Box, a tax relief scheme introduced in 2013, is a critical, but underutilised tool that offshore and energy companies can leverage to reduce their tax liability while fostering innovation.

By paying just 10% corporation tax on profits derived from patented inventions, companies in the energy industry can use additional capital to enhance their R&D efforts and bolster their IP portfolio; essential ingredients for staying competitive in a changing market. The UK government has positioned Patent Box as a vital incentive for retaining high-value research and development activities domestically, which can help the energy industry improve profitability and reinvest in cutting-edge technologies.

The latest statistics highlight the growing importance of the Patent Box scheme. In 2022-23, over £1.4 billion was claimed in Patent Box relief, with the companies in the manufacturing sector, which are closely tied to energy, accounting for 41% of the total relief claims. Micro, Small and Medium-sized companies represented 73% of the 1600 companies to claim Patent Box relief, demonstrating the importance of relief to SMEs, many of which contribute to the energy industry supply chain. Additionally, large companies accounted for 94% of the total relief claimed.

Why is Patent Box so valuable in the offshore and energy sectors?

The costs associated with research and development of new technologies—such as wind turbine advancements, green hydrogen solutions, or energy storage innovations—are immense. However, by reducing the tax burden through Patent Box, companies can afford to reinvest those savings into further IP development. Whether a business is working on new extraction methods or breakthroughs in renewable energy systems, Patent Box can provide much-needed financial flexibility and an incentive to innovate and bring new technologies to market.

Patent Box relief also aligns with the industry’s broader goals of energy transition and sustainability. As companies strive to develop more eco-friendly and efficient energy solutions, IP protection becomes more valuable. As of 2023, the relief had reached record levels, and energy firms were among those reaping the benefits. Companies involved in innovative offshore technologies, for instance, could see significant tax savings, allowing them to push the boundaries of what’s possible in renewable energy generation or fossil fuel alternatives.

However, taking advantage of the Patent Box is not automatic. To qualify, businesses must hold a patent granted by the UK Intellectual Property Office or the European Patent Office, and the income derived from this IP must meet certain conditions. For energy firms already investing in R&D, securing patents should be a top priority—not only for the protection of innovation but also for unlocking these generous tax savings.

If you have any questions or are looking for further advice regarding innovation in the energy industry and how to protect your competitive advantage, please contact John Johnston, Senior Patent Attorney within the Energy Group at HGF. jjohnston@hgf.com

This article was prepared by Senior Patent Attorney John Johnston.