Corporation Tax

Calculating relevant IP profits ― not a new entrant but new IP rights before 1 July 2021

Produced by Tolley
  • 23 Mar 2022 10:41

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

  • Calculating relevant IP profits ― not a new entrant but new IP rights before 1 July 2021
  • FA 2016 changes
  • Overview of the modifications
  • Step 1 ― relevant IP income
  • Step 2 ― relevant IP income sub-streams
  • Step 3 ― allocate debits
  • Step 4 ― deduct debits and routine return
  • Step 5 ― deduct marketing assets return
  • Step 6 ― R&D fraction
  • Step 7 ― combine the sub-streams
  • More...

Calculating relevant IP profits ― not a new entrant but new IP rights before 1 July 2021

FA 2016 changes

FA 2016, s 64 introduced major changes to the patent box regime, following recommendations made by the OECD to implement an internationally developed framework for preferential IP regimes to address base erosion and profit shifting (BEPS). The commentary in this guidance note applies to the calculation of relevant IP profits of a company where:

  1. the accounting period begins before 1 July 2021

  2. the company is not a new entrant, ie the company made a patent box election for an accounting period beginning before 1 July 2016, or it has not elected to be treated as a new entrant, and

  3. any amount of the relevant IP income brought into account as a credit in calculating the profits of the trade for the accounting period is properly attributable to a ‘new’ qualifying IP right, ie IP granted, assigned or exclusively licensed to the company on or after 1 July 2016

CTA 2010, s 357BO

From 1 July 2021, the rules at CTA 2010, ss 357BF–357BNC (Pt 8A, Ch 2A) (those applicable to new entrants) apply to all companies, as set out in the Calculating relevant IP profits ― new entrants and 1 July 2021 onwards guidance note. 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 basis.

Income which is attributable to a new qualifying IP right assigned

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