Patent box—companies with relevant IP losses
Produced in partnership with Anne Fairpo of Temple Tax Chambers
Patent box—companies with relevant IP losses

The following Tax guidance note Produced in partnership with Anne Fairpo of Temple Tax Chambers provides comprehensive and up to date legal information covering:

  • Patent box—companies with relevant IP losses
  • Set-off amount
  • Set off against RP of a second trade
  • Example
  • Set off against RP of group companies
  • Carry forward of set-off amount
  • Example
  • Phasing in set off
  • Example
  • Cessation of trade or patent box election
  • more

In the early stages of IP development, a company may derive income from its qualifying IP rights but not yet make a profit. Alternatively, a company may generate a profit that is less than the routine return on the costs of earning such income.

Where a company has a relevant IP loss (RIPL) as a result of its patent box calculation (for which, see Practice Notes: Patent box—standard calculation of relief and Patent box streaming calculation—grandfathered and new rules), the company will not benefit from patent box relief in relation to the loss-making trade for that accounting period. Instead, the company must:

  1. set off the RIPL:

    1. first, against any patent box profits from another trade of the company, and

    2. secondly against any patent box profits of another group company for a relevant accounting period, and

  2. to the extent any RIPL remains, the company must carry the balance forward to set against future patent box profits (of its own or within its group)

Broadly, this is intended to ensure that a company’s patent box losses are not relieved at the normal rate of corporation tax while its patent box profits are taxed at a reduced rate.

Set-off amount

Where the company has a RIPL for an accounting period, the company is treated as having a set-off amount equivalent to the amount of the

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