What was the purpose of section 357CK of the Corporation Tax Act 2010?

Section 357CK defined which deductions were excluded from being classified as routine deductions under the Patent Box regime in Part 8A of the Corporation Tax Act 2010. It helped ring-fence profits genuinely derived from qualifying intellectual property by identifying non-routine deductions used in calculating the reduced tax rate entitlement.

When was section 357CK removed from the Corporation Tax Act 2010?

Section 357CK was omitted in its entirety with effect from 15 September 2016. The removal was enacted by Finance Act 2016, section 64 and Schedule 9, paragraph 9, as part of wider reforms to the Patent Box regime designed to align United Kingdom rules with the OECD modified nexus approach.

Why was section 357CK removed from the Patent Box rules?

The removal formed part of significant reforms introduced by Finance Act 2016 to bring the United Kingdom's Patent Box regime into line with the OECD's internationally agreed modified nexus approach. The reformed rules use a different methodology for calculating qualifying profits, rendering the non-routine deductions concept in section 357CK unnecessary.

How should companies now calculate Patent Box profits without section 357CK?

Companies must calculate Patent Box profits using the revised rules introduced by Finance Act 2016 within the current provisions of Part 8A of the Corporation Tax Act 2010. The former concept of non-routine deductions no longer applies, and accountants should refer to the amended legislative framework now in force.

Corporation Tax Act 2010 section 357CK

Deductions that are not routine deductions

Section 357CK previously defined which deductions were excluded from being treated as routine deductions for the purposes of the Patent Box regime, but has since been removed from the legislation.

Section 357CK originally formed part of the Patent Box rules within Part 8A of the Corporation Tax Act 2010.
The section set out which types of deductions should not be classified as routine deductions when calculating the relevant intellectual property profits eligible for the reduced Patent Box tax rate.
The entire section was omitted from the legislation by Finance Act 2016, Schedule 9, paragraph 9, with effect from 15 September 2016.
The removal was part of a wider set of reforms to the Patent Box regime introduced by Finance Act 2016 to align the UK rules with the OECD's modified nexus approach.

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