Corporation Tax Act 2010 section 357BH

Relevant IP income

Section 357BH defines what counts as "relevant IP income" for the purposes of the Patent Box regime, setting out five categories of income that can qualify for the reduced rate of corporation tax.

• Relevant IP income falls into five categories: sales income from items covered by qualifying IP rights; licence fees and royalties received for granting rights over qualifying IP; proceeds from selling or disposing of qualifying IP rights or exclusive licences; damages received for infringement or alleged infringement of qualifying IP rights; and other compensation such as insurance proceeds or damages relating to qualifying items or lost IP income
• Sales income covers items protected by a qualifying IP right, items incorporating such protected items, and items mainly designed to be incorporated into either of those — but an item's packaging is treated separately unless the packaging is essential to the item's intended function
• Income from infringement damages or other compensation only counts as relevant IP income if the event giving rise to the payment occurred while the company was a qualifying company with a Patent Box election in force — and if only part of the event fell within that period, only a just and reasonable proportion of the income qualifies
• Throughout this section, any reference to a qualifying IP right held by the company includes a right in respect of which the company holds an exclusive licence, and income that falls within the definition of excluded income under section 357BHB is not treated as relevant IP income