Commentary

D1.1203B Calculation—existing claimants with IP rights acquired before 1 July 2016

Corporate tax
Corporate tax | Commentary

D1.1203B Calculation—existing claimants with IP rights acquired before 1 July 2016

Corporate tax | Commentary

D1.1203B Calculation—existing claimants with IP rights acquired before 1 July 2016

The provisions in this article apply to companies that made a patent box election prior to 1 July 2016 in relation to existing IP rights and continue to apply until 1 July 2021 ('the grandfathered regime'). For such companies that acquire new qualifying IP rights before 1 July 2021, the rules at D1.1203C apply. From 1 July 2021 the rules at D1.1203A apply to all companies.

The following calculation applies for companies that have made a patent box election prior to 1 July 2016 in relation to existing IP rights (and have not elected for early application of the rules at D1.1203C). These rules have been grandfathered such that they continue to apply until 1 July 2021, although for any new IP rights acquired on or after 1 July 2016 (2 January 2016 in certain cases), by such companies, the rules at D1.1203C apply1. Where an accounting period straddles these respective dates the period is split into two notional periods, with profits and losses being apportioned on a just and reasonable basis2.

As for claims made by new entrants, where an election is made, rather than applying a reduced rate of tax to eligible profits, an additional deduction is given from trading profits of an amount that has the same effect as reducing the main rate of corporation tax on eligible profits to the special IP rate3.

The formula calculating this deduction is set out in the legislation as4:

RP × (MR –

To continue reading
View the latest version of this document, as well as thousands of others like it, sign in to TolleyLibrary or register for a free trial