Corporation Tax Act 2010 section 357BQ

The modifications

Section 357BQ sets out modifications to the rules for calculating relevant IP profits where a company that is not a new entrant to the Patent Box regime has income from "mixed" products or processes — that is, products or processes that incorporate both "old" and "new" qualifying IP rights.

• Income from mixed products or processes (incorporating both old and new IP rights) may be split between an old IP rights sub-stream (with no R&D fraction applied) and new IP sub-streams (where an R&D fraction is applied).
• Where it is not reasonably practicable to split the income, and the product's value is wholly or mainly attributable to old IP, or the old IP percentage is 80% or more, all income may be allocated to the old IP rights sub-stream with no R&D fraction.
• Where the old IP percentage is at least 20% but less than 80%, that percentage of income may be placed in the old IP rights sub-stream, with the remainder allocated to a product or process sub-stream subject to the R&D fraction.
• If none of these special circumstances apply and the old IP percentage is below 20%, all income defaults to being treated as arising from new IP, and the R&D fraction is applied to the full amount.