Giving effect to the patent box deduction and making an election

By Tolley
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The following Corporation Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Giving effect to the patent box deduction and making an election
  • Calculating the patent box deduction
  • Making the patent box election

Calculating the patent box deduction

The introductory section of the patent box legislation states that: “A company may elect that any relevant IP profits of a trade of the company for an accounting period for which is it is a qualifying company are chargeable at a lower rate of corporation tax”.

CTA 2010, s 357A(1)

In order to give effect to the election, a deduction is taken when calculating the profits of the trade for corporation tax purposes for the period in question, such that relief is given by way of a lower effective rate of corporation tax on patent box profits.

CTA 2010, s 357A(2)

The way in which the deduction is calculated is set out in CTA 2010, s 357A(3) as follows:

Where:

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