Corporation Tax Act 2010 section 357DC

The mandatory streaming conditions

Section 357DC sets out the three conditions (A, B and C) under which a company within the Patent Box regime is required to use the streaming method to calculate its relevant IP profits, rather than the simpler apportionment approach.

• Condition A applies where a substantial amount of income taxed as trading profit for the period is not fully recognised as revenue in the company's accounts for that period, for example due to prior-year adjustments or transfer pricing corrections
• Condition B applies where the trade's total gross income includes both relevant IP income and a substantial amount of licensing income from intellectual property that does not qualify as relevant IP income
• Condition C applies where the trade's total gross income includes non-IP income alongside a substantial amount of relevant IP income earned from licensing IP rights that the company holds only under an exclusive licence rather than owning outright
• An amount is "substantial" if it exceeds the lower of £2,000,000 or 20% of the trade's total gross income for the period, but amounts of £50,000 or less are never treated as substantial