UK motorsport businesses missing out on corporation tax relief
The heart of the UK’s Formula 1 and motorsport hub could be paying unnecessarily high tax rates because they’re unaware of free relief available to them, a new study has revealed.
Less than 10 per cent of firms are claiming Patent Box relief in the motorsport corridor of the UK, which houses the likes of British Grand Prix host track Silverstone and the majority of the seven Formula 1 teams with UK operations.
The Patent Box tax benefit is a HMRC initiative whereby innovative companies are rewarded for their work. Companies that keep their IP inside the United Kingdom see corporation tax on qualifying profits slashed to 10 per cent, down from the eye-watering 25 per cent standard rate.
The research, carried out by tax experts ForrestBrown, states that just 115 businesses claimed the relief despite the area being home to more than 4,300 businesses. In 2021 1,475 patents were granted in the UK for transport, engine and/or pump development, a key element to the production of Britain’s highly profitable motorsport industry.
Tax relief for motorsport
The firm adds that “firms with patented innovations, for example on advanced aerodynamic components or hybrid energy systems, could be entitled to tax reductions”.
It is estimated that Formula 1 alone, as a business and a driver of fan spending, is worth close to £10bn to the UK economy, with businesses ranging from key F1 constructors to painting firms and small businesses in their thousands.
During the Covid-19 pandemic Mercedes aided in the invention and creation of ventilator parts that revolutionised NHS care for the disease.
Angela Banerjee, associate director at ForrestBrown, told Morning Wire: “At first glance it may seem surprising that some of the UK’s most innovative firms aren’t accessing this generous relief, in many ways this region of the UK is merely a microcosm of UK business as a whole. Patent Box remains underutilised when it could be providing a competitive edge.
“It’s clear that there is a lack of understanding regarding how or why they should claim. The eligibility for Patent Box tends to be quite clear cut, which makes it even more important for those businesses who have protected their IP to ensure they are not missing out on crucial tax reductions.”