What is the actual marketing royalty under section 357BKB of the Corporation Tax Act 2010?

The actual marketing royalty is the total of all sums a company has genuinely paid to acquire relevant marketing assets, or rights to use them, that have been allocated to a particular relevant IP income sub-stream at Step 3 of the relevant IP profits calculation under section 357BF. It reflects real expenditure rather than hypothetical values.

How is the actual marketing royalty calculated for a relevant IP income sub-stream?

To calculate the actual marketing royalty, you add together all amounts the company actually paid to buy relevant marketing assets outright or to obtain the right to exploit such assets. Only amounts allocated to the specific sub-stream through Step 3 of the relevant IP profits calculation in section 357BF are included in the total.

What are relevant marketing assets for the purposes of section 357BKB?

Relevant marketing assets carry the same meaning as in the notional marketing royalty provisions of section 357BKA. They broadly include trademarks, brand names, signs, and similar items with a marketing function that contribute to the commercial value of the product or service, as distinct from qualifying IP rights themselves.

How does the actual marketing royalty differ from the notional marketing royalty in patent box calculations?

The actual marketing royalty reflects amounts the company genuinely spent on marketing assets, whereas the notional marketing royalty represents a hypothetical arm's length royalty. The two figures are compared to determine which is used in calculating relevant IP profits, ensuring patent box relief targets profits from patented innovation rather than brand strength.

Corporation Tax Act 2010 section 357BKB

Actual marketing royalty

Section 357BKB defines how to calculate the actual marketing royalty for a relevant IP income sub-stream, by totalling the amounts paid for marketing assets that have been allocated to that sub-stream.

The actual marketing royalty is the total of all sums paid to acquire relevant marketing assets or rights to use them, where those sums have been allocated to the sub-stream
Only amounts allocated to the sub-stream at Step 3 of the relevant IP profits calculation are included
Relevant marketing assets carry the same meaning as defined for the notional marketing royalty provisions
The actual marketing royalty may differ from the notional marketing royalty, as it reflects real amounts paid rather than hypothetical arm's length values

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