Corporation Tax Act 2010 section 357BC

The development condition

Section 357BC sets out four conditions (A to D) under which a company can satisfy the development condition in relation to an intellectual property right, which is one of the requirements for a right to be a qualifying IP right under the Patent Box regime.

• Condition A applies where the company itself carried out qualifying development on the IP right and has not since experienced a change of control (i.e. it has not become or ceased to be a controlled member of a group since the development was done).
• Condition B applies where the company carried out qualifying development but has since had a change of control; the company can still meet the condition if it continues performing activities of the same type as the qualifying development for 12 months after the change and does not leave the group or become a controlled member of another group during that period.
• Condition C allows a company within a group to satisfy the development condition based on qualifying development carried out by another company that was a member of the same group at the time the development took place, even if the company now holding the right was not itself a group member at that time.
• Condition D covers the situation where a company (T) that has carried out qualifying development joins a new group and transfers the IP rights to another group member; the transferee can meet the development condition provided that T and/or the transferee continue activities of the same nature as the qualifying development for 12 months after T joined the group.