Corporation Tax Act 2010 section 357CO

Notional marketing royalty

Section 357CO sets out how to calculate the notional marketing royalty, which represents the value attributable to marketing assets within a company's relevant intellectual property income, for use in determining the marketing assets return figure.

• The notional marketing royalty is the percentage of relevant IP income a company would hypothetically pay an independent third party for the right to exploit its marketing assets, determined on an arm's length basis in accordance with OECD transfer pricing principles.
• A marketing asset is "relevant" if the company's relevant IP income for the period includes income from activities that involve exploiting that asset; the hypothetical royalty percentage is fixed at the start of each accounting period and applies to all subsequent periods.
• Marketing assets include registered trade marks, equivalent rights recognised outside the UK, geographical indications of origin, and customer data held for marketing purposes — whether or not they are capable of being transferred or assigned.
• The calculation must exclude assumptions such as lump-sum payments or front- or rear-loaded royalty arrangements, ensuring the notional royalty relates only to relevant IP income arising in the accounting period.