Giving effect to the patent box deduction and making an election

Produced by Tolley
Giving effect to the patent box deduction and making an election

The following Corporation Tax guidance note Produced 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
  • Commencement and transitional periods
  • Making the patent box election
  • Timing
  • Revocation

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”.

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.

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

Where:

  1. RP is the relevant IP profits of the trade of the company

  2. MR is the main rate of co

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