Overseas firms steal a march on UK in 'patent box' tax break hunt

The number of foreign firms applying for patents in the UK shot up last year, when tax cuts made it a favoured destination for pharmaceuticals and research and development industries – but British companies are missing out.

George Osborne first announced the introduction of a "patent box" in his 2011 Autumn Statement. The relief, which comes into force in April, cuts the level of corporation tax on profits generated from UK-owned intellectual property to 10 per cent.

The tax break will be available to profits from patents that are already registered, but so far hasn't succeeded in prompting British inventors to follow in the footsteps of wind-up radio creator Trevor Baylis or billionaire Sir James Dyson. The number of patent applications to the UK Intellectual Property Office from within the UK was just 15,370 in 2012, almost equal to the 2011 figure of 15,343, according to research by City law firm RPC.

The number of patents filed in Britain by US firms rose by 26 per cent while Japanese companies asked for 19 per cent more patents. German pharmaceuticals firms and other research and development businesses filed 27 per cent more patents last year than 12 months earlier.

The figures come days after AstraZeneca, Britain's second-biggest pharmaceuticals company, announced that it is to close its research and development facility in Cheshire. About 500 jobs will be lost there over the next three years.

By contrast, there was a sharp increase in UK patent applications by overseas businesses in 2012. The total climbed 14 per cent to 7,865. Paul Joseph, intellectual property and technology partner at RPC, said: "The patent box means that the UK is now one of the world's most favourable tax jurisdictions for businesses with profits from research and development. However, the very favourable incoming regime doesn't appear to have fed through into more British businesses registering patents in anticipation of exploiting the tax break."

He added: "Foreign companies, which are unlikely to be able to benefit from the patent box, are being more proactive in registering their patents in Britain. The UK is in danger of falling behind."