Corporation Tax Act 2010 section 357DA

Relevant IP profits

Section 357DA sets out the step-by-step method for calculating the relevant intellectual property (IP) profits of a company's trade for an accounting period, where the company has made a streaming election or meets one or more mandatory streaming conditions.

• Trade income (excluding finance income) is split into two streams — relevant IP income and non-IP income — and allowable deductions are allocated on a just and reasonable basis between the two streams
• A routine return figure (10% of routine deductions allocated to the IP income stream) and, where applicable, a marketing assets return figure are deducted from the IP stream profit to arrive at the qualifying residual profit attributable to qualifying IP rights
• Companies eligible for small claims treatment may elect to use a simplified calculation instead of deducting a marketing assets return figure
• If the final result is positive it is the relevant IP profit eligible for the Patent Box reduced rate; if negative it is a relevant IP loss carried forward under Chapter 5