Corporation Tax

Patent box ― qualifying companies

Produced by Tolley
  • 05 Apr 2022 08:42

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

  • Patent box ― qualifying companies
  • Meaning of qualifying company for the patent box
  • The development condition
  • Qualifying development
  • The active ownership condition
  • Definition of a group for patent box purposes
  • Application of the patent box to partnerships

Patent box ― qualifying companies

Meaning of qualifying company for the patent box

Only those companies which meet the qualifying company conditions in CTA 2010, s 357B are able to benefit from the reduced rate of corporation tax which can be applied to patent box profits. See the Patent box tax regime ― overview guidance note for more background information on the regime. Standalone companies must satisfy conditions A or B below, and companies which are members of a group must also satisfy condition C, as follows:

  1. Condition A is that at any time during the accounting period, the company holds qualifying intellectual property (IP) rights, or holds an exclusive licence in respect of any such rights

  2. Condition B is that:

    1. the company has held a qualifying IP right or exclusive licence (as defined in CTA 2010, s 357BA) in respect of a right

    2. the company has received income in respect of an event which occurred in relation to the right or licence when:

      1. the company was a qualifying company, and

      2. the company had made a patent box election

    3. the income falls to be taxed in the accounting period

  3. Condition C is that the company meets the ‘active ownership’ condition for the accounting period

For the purposes of condition B, a right is a qualifying IP right if it is listed in CTA 2010, s 357BB (see also the Patent box ― qualifying intellectual property guidance note) and the company meets the ‘development condition’ in relation to the right as set out

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