UK manufacturers missing out on tax relief for innovation, warn RSM UK and Make UK
A new report by leading audit, tax and consulting firm RSM UK and industry body Make UK reveals that almost half of UK manufacturers could be missing out on innovation-related tax incentives available to those who hold eligible patents.
The report, published ahead of the Chancellor’s Autumn Budget (26 November 2025), found that while 51% of manufacturing businesses do have registered patents, less than a third (32%) of them are currently elected into the regime, with the report showing that Patent Box is the least likely tax relief to be obtained. The regime is designed to encourage UK companies to develop and commercialise their intellectual property by offering a lower rate of corporation tax on patent related profits.
The Investment Monitor report also found that almost a quarter (23%) of manufacturers have created a unique product or process that could be eligible, but because they haven’t registered a patent, are missing out on unlocking Patent Box tax reliefs.
In addition, findings show that 59% of manufacturers want the Patent Box relief process to be simplified with clearer guidelines on how to attribute revenue to specific patents. However, only 33% of manufacturers said they want a campaign to raise awareness of Patent Box, highlighting a gap between perceived need and actual awareness that may be limiting uptake.
Chris Alderman, partner and innovation reliefs specialist at RSM UK, said: “At a time when UK innovation is expected to bridge the productivity gap and drive global competitiveness as part of the Industrial Strategy, it’s concerning to see UK manufacturers are missing out on valuable tax relief through the Patent Box regime.
“While the relief is designed to incentivise companies to commercialise patented technologies, uptake remains notably low and is not conducive to the government’s long-term growth ambitions. Findings suggest there is a significant disconnect between innovation and IP strategy, as nearly a quarter of manufacturers have developed unique products or processes that could qualify, yet remain unpatented. There is also the added risk of these unpatented products or processes being copied or stolen.”
He added: “This is a missed opportunity not just for individual businesses, but for the wider UK economy, which stands to gain from increased productivity, competitiveness, and growth. HMRC has initiated a One-To-Many letter campaign to companies elected into Patent Box, setting out the expected disclosures when including Patent Box deductions in a tax return. We would therefore urge manufacturers to explore whether their innovations could qualify, if their patent box deduction meets HMRC’s requirements, and in turn unlock significant tax savings.”
Verity Davidge, Policy Director at Make UK, added: “The Patent Box relief has the potential to unlock even more innovation in the manufacturing sector. However, the complexities of the relief means that the majority of manufacturers are missing out. Government needs to immediately simplify the system, specifically focusing on clearer guidelines on how to attribute revenue to specific patents, which for many remains a sticking point. This should be accompanied by an awareness raising campaign to highlight the benefits of the relief, not just for the sector, but the economy as a whole.”