Corporation Tax Act 2010 section 357ED

Company ceasing to carry on trade, etc.

Section 357ED deals with what happens to an unallocated patent box set-off amount when a company stops trading, leaves the corporation tax charge, or its patent box election ceases to have effect.

• Where a company has an outstanding set-off amount from patent box losses and then ceases to trade, falls outside the corporation tax charge, or its patent box election ends, the set-off amount is not simply lost — it can continue to be carried forward and used.
• If the company is part of a group, the remaining set-off amount can be transferred to another group member — by default to the member with the highest relevant IP profits, or if none have IP profits, to the member with the largest existing set-off amount. The group companies can jointly elect a different recipient instead.
• If the company is not part of a group and has no other trades, or if no group member qualifies as a relevant group member (i.e. no group company has a patent box election in force and is a qualifying company), the set-off amount is permanently extinguished — reduced to nil.
• The normal rules for allocating the set-off amount across a company's own trades and within a group continue to apply, but with modifications to reflect the fact that the original company is no longer actively trading or within the patent box regime.