Patent box anti-avoidance provisions

By Tolley

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

  • Patent box anti-avoidance provisions
  • Exclusive licences
  • Incorporation of qualifying items
  • Tax advantage schemes

Exclusive licences

In order for a licence to satisfy the conditions required for the preferential patent box treatment, the rights available under the licence must be conferred to the licensee to the exclusion of all others. However, an exclusive licence will not qualify for patent box treatment where the main purpose or one of the main purposes of conferring the rights under the licence is to secure that the licence is an exclusive licence for patent box purposes.

CTA 2010, s 357F

HMRC has confirmed that this anti-avoidance provision will not apply where there is a genuine commercial re-negotiation of the terms of a licence to make it an exclusive one so that patent box benefits may be achieved. The new licence must be a true reflection of the way in which the licensee and licensor operate in practice. In the context of genuine commercial arrangements, it should be relatively straightforward to prove this. However, tax advisers should recommend to their clients that they retain appropriate evidence to document their general terms of business so that it can be provided to HMRC in the event of any enquiries on this matter.


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