Commentary

D1.1203E Patent box losses

Corporate tax
Corporate tax | Commentary

D1.1203E Patent box losses

Corporate tax | Commentary

D1.1203E Patent box losses

From 1 April 20131, where a company would be entitled to claim a patent box deduction (D1.1203A) when calculating trading profits, but has for the relevant accounting period incurred IP losses (because, for example, the company is in the early stages of IP development and has yet to return a profit) it is entitled to a set-off amount equivalent to the loss, which can be matched with relevant IP profits, or carried forward (see below)2. To match the phasing in of the lower patent box rate on profits, set-off amounts between 2013 and 2016 which are carried forward are reduced according to a formula. The formula is:

where P is percentage given as the percentage of RP applicable to the following financial year (see (D1.1203A)3.

This reduction reflects the fact that the patent box benefits increase each year by 10%, from the initial figure of 60%. Where an

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