The UK’s manufacturing sector currently stands at a crossroads. While the industry remains a global powerhouse, contributing nearly 10% to national GDP, investment intensity has dipped to its lowest level since 2017. In an environment defined by rising business costs, supply chain challenges and political uncertainty, manufacturers are increasingly selective about where they deploy capital.

The 2025 Modern Industrial Strategy and the Corporate Tax Roadmap provide a stable 10-year framework designed to reward investment and innovation. For manufacturing leaders, a significantly underutilised opportunity within this framework is Patent Box tax relief.

Our Manufacturing Investment Monitor, created in partnership with Make UK, reveals a startling ‘innovation gap’. While 56% of UK manufacturers surveyed believe they have created unique, patentable products or processes, only 32% of these manufacturers have ever benefitted from Patent Box.

Many businesses are effectively leaving money on the table by undertaking the development activities but not following through to obtain the tax reliefs that reward them for their work.

What is Patent Box tax relief and why does it matter for manufacturers?

Patent Box is not just a tax ‘extra’; it’s a strategic tool to improve long-term cash flow and project feasibility.

• Substantial rate reduction: It allows companies to apply a lower 10% Corporation Tax rate to profits earned from their patented inventions, rather than the 25% main rate.
• Rewarding IP-rich firms: For a manufacturer investing in R&D, the ability to claim R&D relief on the expenditure, protect any eligible IP generated by registering a patent, and then pay a significantly reduced tax rate on the resulting profits is a game changer for project viability.

Addressing the barriers to claiming the relief

The system is not without its hurdles. For those companies that are making a Patent Box election, many are getting it wrong. HMRC are now insisting on more complete disclosure to support the calculation and have issued guidance notes to help taxpayers avoid common errors. Manufacturers have highlighted high administrative costs and a lack of in-house expertise as key deterrents. To address this, the government and industry bodies are pushing for:

• Simplification: 59% of manufacturers want a simpler claims process with clearer guidelines on how to attribute specific revenues to a patent.
• Digital integration: Moving toward a ‘digital first’ approach for applications and standardised templates to reduce the bureaucratic burden.

Think outside the Box: three practical steps to maximise Patent Box benefits

In a world where 84% of manufacturing businesses consider tax reliefs when making investment choices, Patent Box is a vital differentiator. It is the link that turns a ‘sunk cost’ in R&D into a long-term, high-margin revenue stream protected by a lower tax environment. The UK’s Modern Industrial Strategy is built to support ‘superstar’ firms; Patent Box is the vehicle to help you become one.

Based on the latest industry insights and government policy frameworks, here are three key takeaway actions for businesses considering utilising Patent Box:

• Align IP strategy with tax planning: Perform a thorough audit of potentially patentable products and processes. While 56% of manufacturers believe they have patentable IP, only 49% own registered patents. Bridging this gap is essential to unlocking the Patent Box.
• Leverage integrated R&D and IP incentives: Integrate your Patent Box incentives with existing R&D tax credit claim activities.
• Utilise new support mechanisms: Take advantage of government efforts to reduce administrative barriers. This includes engaging with HMRC guidance to accurately attribute revenues to specific patents; a key request from 59% of manufacturers.

The calculation process is frequently cited as the most significant hurdle. Claimants must navigate detailed requirements such as ‘streaming’, allocating income and expenses to separate IP assets, and calculating ‘routine returns’.

How we can support your manufacturing business

You can access specialist support from RSM’s Innovation Reliefs practice to guide you through the Patent Box process. We can help you develop a robust methodology to capture the benefits of this valuable relief and provide long-term value and certainty to help your business grow.

To find out more about Patent Box and how we can help, please contact Chris Alderman or Graham Steele.

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