Corporation Tax Act 2010 section 357FB

Tax advantage schemes

Section 357FB is a targeted anti-avoidance rule that limits or removes the Patent Box deduction where a company has entered into a scheme whose main purpose (or one of its main purposes) is to obtain a tax advantage from the Patent Box regime.

• The rule applies where a company entitled to a Patent Box deduction is, or has been, party to a scheme aimed at securing a tax advantage — and this extends to schemes entered into by any member of the company's group
• A "relevant tax advantage" arises where the scheme would increase the Patent Box deduction through avoiding provisions of the regime, artificially inflating relevant IP income, creating a mismatch between IP income and related expenditure, or manipulating the R&D fraction
• Where the rule is triggered, the company's Patent Box deduction is reduced to whatever amount ensures that no tax advantage arises — which could mean losing the deduction entirely
• "Scheme" is defined very broadly to include any arrangements or understanding of any kind, whether or not legally enforceable, and whether involving a single transaction or multiple transactions