Corporation Tax Act 2010 section 357GCA

Application of this Part in relation to transferred trades

Section 357GCA sets out how the Patent Box rules apply when a company transfers a trade, together with the qualifying intellectual property rights used in that trade, to another company.

• When a company (the transferor) ceases a trade involving a qualifying IP right and assigns or exclusively licences that right to another company (the transferee) which then carries on the trade, special rules apply for calculating the transferee's relevant IP profits.
• The transferee inherits the transferor's status: it is not treated as a new entrant if the transferor had a Patent Box election in effect on the transfer date and the first accounting period covered by that election began before 1 July 2016, and any IP right that was an old qualifying IP right for the transferor is also treated as old for the transferee.
• Research and development expenditure incurred by the transferor before the transfer date — whether carried out in-house, sub-contracted to third parties, or relating to the acquisition of the IP right — is treated as if it had been incurred by the transferee, ensuring continuity in the R&D fraction calculation.
• However, any payment the transferee makes to the transferor for the actual assignment, grant or transfer of the IP right is disregarded and does not count as qualifying expenditure on acquisition of the right.