Corporation Tax Act 2010 section 357CQ

Profits arising before grant of right

Section 357CQ allows a company to include profits earned during the patent pending period — the time between applying for a patent and its actual grant — in its Patent Box calculation for the accounting period in which the patent is granted.

• A company may elect to add back profits earned during the patent pending period into its relevant IP profits for the period in which the patent is granted, subject to a maximum look-back of six years.
• The additional amount is the difference between the actual relevant IP profits for each relevant accounting period and what those profits would have been had the patent been treated as granted on the "relevant day" (the later of six years before grant, the application filing date, or the date an exclusive licence was granted).
• Only accounting periods in which the company had a Patent Box election in force, was a qualifying company, and which ended on or after the relevant day, are included in the calculation; any profits already offset by relevant IP losses are excluded.
• A company is still treated as a qualifying company for these purposes even if the sole reason it would not qualify is that the patent had not yet been granted, or that it had disposed of the rights or licence before the patent was granted.