Corporation Tax Act 2010 section 357B

Meaning of "qualifying company"

Section 357B defines what makes a company a "qualifying company" for Patent Box purposes, setting out the conditions relating to IP rights ownership, historic income, and group membership that must be satisfied in a given accounting period.

• A company qualifies if it holds qualifying IP rights (or an exclusive licence over such rights) at any point during the accounting period, or if it receives taxable income from events that occurred when it previously held such rights and had a Patent Box election in force.
• A qualifying IP right must be a right of a type covered by the Patent Box rules and the company must have met the development condition in relation to that right — meaning the company must have been actively involved in creating, developing or significantly improving the IP.
• Where the company is a member of a group, it must also satisfy an active ownership condition, which requires the group to perform significant management activity in relation to the IP rights portfolio.
• The ability to qualify on the basis of historic income ensures that, for example, damages received for patent infringement after a patent has expired can still benefit from the Patent Box regime, provided the infringement took place while the company was a qualifying company with a Patent Box election in effect.