The following Corporation Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:
There are several steps which must be carried out in order to calculate the amount of qualifying IP profits to which the reduced patent box rate of corporation tax can be applied. Please read the Calculating relevant IP profits ― new entrants guidance note in conjunction with this note for further details of these steps.
For new entrants to the patent box regime, broadly those making their first election for an accounting period beginning on or after 1 July 2016, Step 6 requires the calculation of an R&D fraction. This is sometimes referred to as the ‘nexus fraction’ and effectively limits the level of profits that are eligible for the patent box rate. This is a requirement arising from the OECD’s report on preferential IP regimes and was introduced by FA 2016, s 64.
This fraction is based on the amount of qualifying in-house R&D expenditure incurred by the patent box company on that particular patent (or other qualifying IP right) plus third party sub-contracted R&D, relative to overall R&D expenditure and any relevant IP acquisition costs. A separate nexus fraction will have to be calculated under this regime for each stream of qualifying patent box profits based on R&D expenditure incurred on the specific patent to which the income stream relates.
The way in which the R&D fraction is calculated for a relevant IP income sub-stream is set out below.
Changes which impact the calculation of the R&D fraction have been introduced by F(No 2)A 2017, s 23. The amendments seek to ensure that companies sharing income and costs of R&D projects under CSA are neither advantaged nor disadvantaged for the purposes of the patent box. Commercial arrangements such as this had previously been excluded from the patent box legislation. The intended result of these changes is that the company’s own contribution to the development work should drive the amount of profit benefitting from the reduced patent box rate, rather than the efforts of
**Free trials are only available to individuals based in the UK. We may terminate this trial at any time or decide not to give a trial, for any reason.
Access this article and thousands of others like it free for 7 days with a trial of TolleyGuidance.
Read full article
Already a subscriber? Login
The basic rule is that all benefits provided to an employee by reason of their employment are taxable unless there is a specific exemption or other rule that means they are not chargeable to tax.ExemptionsThe main exemptions for employee benefits are in ITEPA 2003, ss 227–326B (Pt 4).Below is an
Time for paymentTwo statutory rules apply on death:•tax is ‘due’ six months after the end of the month of death and carries interest from the ‘due’ date until paidThere is a possibility of payment by instalments, but this applies to certain types of property only ― see the ‘Availability of
Expenditure of a capital nature is not allowed as a deduction when calculating trading profits. Expenditure of a revenue nature is allowable, provided there is no specific statutory rule prohibiting a deduction and the expenditure also satisfies the wholly and exclusively test. See the Wholly and
This guidance note provides an overview of what conditions need to be met before a business is entitled to treat VAT incurred as input tax. This note should be read in conjunction with the other notes in the ‘Claiming input tax’ subtopic. For a flowchart outlining the procedure for claiming input
To view our latest tax guidance content, sign in to Tolley Guidance or register for a free trial.