What does section 357GCZD of the Corporation Tax Act 2010 do?

Section 357GCZD ensures that when another party to a cost-sharing arrangement acquires a qualifying IP right or exclusive licence from a third party, any payment the company makes under the arrangement is treated as if the company had acquired the right or licence directly. This allows the payment to count as qualifying expenditure for the Patent Box R&D fraction.

How are payments under a cost-sharing arrangement treated for Patent Box purposes under section 357GCZD?

Payments made by a company under a cost-sharing arrangement towards the acquisition of qualifying IP rights or exclusive licences by another party are deemed qualifying expenditure under section 357BLE. This expenditure feeds into the R&D fraction calculation, determining the proportion of Patent Box profits eligible for the reduced corporation tax rate.

Does it matter who the company pays under a cost-sharing arrangement for section 357GCZD to apply?

No, it does not matter whether the company's payment is made to the original rights holder or to the party within the cost-sharing arrangement that received the qualifying IP right or exclusive licence. In both cases, the payment is treated as if the company acquired the right or licence directly from the original holder.

Why is section 357GCZD necessary for companies in cost-sharing arrangements?

Without section 357GCZD, a company's payments towards IP acquisition under a cost-sharing arrangement might not qualify as expenditure for the Patent Box R&D fraction, because the IP right or licence was technically acquired by a different party. This provision ensures the company's contributions are properly recognised as qualifying expenditure.

Corporation Tax Act 2010 section 357GCZD

Acquisition of qualifying IP rights etc. by another party to CSA

Section 357GCZD deals with how payments made by a company under a cost-sharing arrangement are treated when another party to that arrangement acquires qualifying IP rights or exclusive licences from a third party.

Where another party to a cost-sharing arrangement acquires a qualifying IP right related to the invention, any payment the company makes under the arrangement for that acquisition is treated as if the company itself had acquired the right directly.
The same treatment applies where another party to the arrangement receives an exclusive licence over a qualifying IP right related to the invention — the company's payment is treated as if the licence had been granted or transferred directly to the company.
In both cases, it does not matter whether the company's payment is made to the original rights holder or to the party within the arrangement that received the right or licence.
The effect of this deemed treatment is that the payments count as qualifying expenditure on acquisition of IP rights for the purposes of calculating the R&D fraction used in the Patent Box regime.

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