Corporation Tax Act 2010

[F1 PART 8A U.K. Profits arising from the exploitation of patents etc

Textual Amendments

F1 Pt. 8A inserted (with effect in accordance with Sch. 2 paras. 7, 8 of the amending Act) by Finance Act 2012 (c. 14), Sch. 2 para. 1(1)

CHAPTER 1 U.K. Reduced corporation tax rate for profits from patents etc

357A Election for special treatment of profits from patents etc U.K.

(1) A company may elect that any relevant IP profits of a trade of the company for an accounting period for which it is a qualifying company are chargeable at a lower rate of corporation tax.

(2) An election under subsection (1) is to be given effect by allowing a deduction to be made in calculating for corporation tax purposes the profits of the trade for the period.

(3) The amount of the deduction is—F2

where—

RP is the relevant IP profits of the trade of the company,

[F3 “AR” means, in relation to a company—

(a)

in a case where corporation tax is charged at the standard small profits rate on the company’s taxable total profits of the accounting period mentioned in subsection (1) which are not ring fence profits, that rate, or

(b)

in any other case, the main rate of corporation tax.]

IPR is the special IP rate of corporation tax.

(4) The special IP rate of corporation tax is 10%.

(5) Chapter 2 specifies when a company is a qualifying company.

[F4 (6) Chapter 2A makes provision for determining the relevant IP profits or relevant IP losses of a trade of a company for an accounting period in a case where—

(a) the accounting period begins on or after 1 July 2021, or

(b) the company is a new entrant (see subsection (11)).

(7) Chapters 2B, 3 and 4 make provision for determining the relevant IP profits or relevant IP losses of a trade of a company for an accounting period in various cases where—

(a) the accounting period begins before 1 July 2021, and

(b) the company is not a new entrant.]

(8) Chapter 5 makes provision in relation to the relevant IP losses of a trade.

(9) Chapter 6 contains anti-avoidance provisions.

(10) Chapter 7 contains supplementary provision.

[F5 (11) A company is a “new entrant” for the purposes of this Part if—

(a) the first accounting period for which the company's election (or most recent election) under subsection (1) has effect begins on or after 1 July 2016, or

(b) the company elects to be treated as a new entrant for the purposes of this Part.]

Textual Amendments

F2 S. 357A(3) formula: word “AR” substituted for word “MR” in both places it occurs (for accounting periods beginning on or after 1.4.2023) by Finance (No. 2) Act 2023 (c. 30), s. 11(1)(a)(2)

F3 Words in s, 357A(3) substituted (for accounting periods beginning on or after 1.4.2023) by Finance (No. 2) Act 2023 (c. 30), s. 11(1)(b)(2)

F4 S. 357A(6)(7) substituted (with effect in accordance with s. 64(7) of the amending Act) by Finance Act 2016 (c. 24), s. 64(2)(a)

F5 S. 357A(11) inserted (with effect in accordance with s. 64(7) of the amending Act) by Finance Act 2016 (c. 24), s. 64(2)(b)

CHAPTER 2 U.K. Qualifying companies

357B Meaning of “qualifying company” U.K.

(1) A company is a qualifying company for an accounting period if—

(a) condition A or B is met, and

(b) in the case of a company that is a member of a group, condition C is met.

(2) Condition A is that, at any time during the accounting period, the company—

(a) holds any qualifying IP rights, or

(b) holds an exclusive licence in respect of any qualifying IP rights.

For the meaning of “exclusive licence”, see section 357BA.

(3) Condition B is that—

(a) the company has held a qualifying IP right or an exclusive licence in respect of such a right,

(b) the company has received income in respect of an event which occurred in relation to the right or licence, or any part of which so occurred, at a time when—

(i) the company was a qualifying company, and

(ii) an election under [F6 section 357A(1)] had effect in relation to it, and

(c) the income falls to be taxed in the accounting period.

(4) A right is a qualifying IP right for the purposes of this Part if—

(a) it is a right to which this Part applies (see [F7 sections 357BB and 357BBA]), and

(b) the company meets the development condition in relation to the right (see section 357BC).

(5) Condition C is that the company meets the active ownership condition for the accounting period (see section 357BE).

Textual Amendments

F6 Words in s. 357B(3)(b)(ii) substituted (15.9.2016) by Finance Act 2016 (c. 24), Sch. 9 para. 2

F7 Words in s. 357B(4)(a) substituted (31.12.2020) by The Taxes (Amendments) (EU Exit) (No. 2) Regulations 2019 (S.I. 2019/818), regs. 1(2), 8(2); 2020 c. 1, Sch. 5 para. 1(1)

357BA Meaning of “exclusive licence” U.K.

(1) In this Part “exclusive licence”, in relation to a right (“the principal right”), means a licence which—

(a) is granted by the person who holds either the principal right or an exclusive licence in respect of the principal right (“the proprietor”), and

(b) confers on the person holding the licence (“the licence-holder”), or on the licence-holder and persons authorised by it, the rights in respect of the principal right that are listed in subsection (2).

(2) The rights are—

(a) one or more rights conferred to the exclusion of all other persons (including the proprietor) in one or more countries or territories, and

(b) the right—

(i) to bring proceedings without the consent of the proprietor or any other person in respect of any infringement of the rights within paragraph (a), or

(ii) to receive the whole or the greater part of any damages awarded in respect of any such infringement.

(3) Where the licence-holder has any right within subsection (2)(b) by virtue of any enactment or rule of law, the right is to be regarded for the purposes of this section as conferred by the licence.

(4) Where—

(a) a company (“C”) that is a member of a group holds either a right to which this Part applies or an exclusive licence in respect of such a right, and

(b) C confers on another company that is a member of the group all of the rights held by C in respect of the invention,

that other company is to be treated for the purposes of this Part as holding an exclusive licence in respect of that right.

(5) For the purposes of subsection (4) it does not matter if the rights conferred by C do not include the right to enforce, assign or grant a licence of any of those rights.

357BB Rights to which this Part applies U.K.

(1) This Part applies to the following rights—

(a) a patent granted under the Patents Act 1977,

(b) a patent granted under the European Patent Convention,

(c) a right of a specified description which corresponds to a right within paragraph (a) or (b) and is granted under the law of a specified EEA state,

(d) a supplementary protection certificate, [F8 and]

(e) any plant breeders' rights granted in accordance with Part 1 of the Plant Varieties Act 1997,

F9 (f) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2) Where—

(a) directions are in force under section 22 of the Patents Act 1977 (information prejudicial to national security or safety of public) with respect to an application for a patent under that Act, and

(b) the person making the application has been notified under section 18(4) of that Act that the application complies with the requirements of the Act and the rules,

the person is to be treated for the purposes of this Part as if the person had been granted the patent under that Act.

[F10 (3) Where a product benefits from marketing protection (see subsection (4)) or data protection (see subsection (5)), the person who holds the relevant marketing authorisation in respect of the product (see subsection (6A)) is to be treated for the purposes of this Part as having been granted a right to which this Part applies in respect of the product.

(4) A product benefits from marketing protection if—

(a) a marketing authorisation under the Human Medicines Regulations 2012 has been granted in respect of the product and the period during which a generic of the product may be prevented from being sold by reason of regulation 51(8) of those Regulations has not expired;

(b) an orphan marketing authorisation under the Human Medicines Regulations 2012 has been granted in respect of the product and the prohibition arising in connection with that authorisation under regulation 58D(1) of those Regulations remains in force;

(c) a marketing authorisation to which paragraph 6 of Schedule 33A to the Human Medicines Regulations 2012 applies has been granted in respect of the product and the holder of the authorisation continues to benefit from marketing exclusivity by reason of sub-paragraph (4)(f) or (7) of that paragraph;

(d) a marketing authorisation under the Veterinary Medicines Regulations 2013 has been granted in respect of the product and the period during which an equivalent of the product may be prevented from being placed on the market by paragraph 11(3) of Schedule 1 to those Regulations has not expired.

(5) A product benefits from data protection if—

(a) a marketing authorisation in respect of the product under the Human Medicines Regulations 2012 has been granted or varied in circumstances giving rise to the prohibition in regulation 51(16) or 64A(3) of those Regulations and that prohibition remains in force;

(b) a marketing authorisation under Regulation (EC) No 1107/2009 has been granted in respect of the product and data relating to the product benefits from data protection under Article 59 of that Regulation.]

(6) The reference to data in [F11 subsection (5)(b)] does not include a study necessary for the renewal or review of a marketing authorisation granted in respect of the product in accordance with Regulation (EC) No 1107/2009.

[F12 (6A) In subsection (3) the relevant marketing authorisation is the marketing authorisation by reference to which it is determined that the product benefits from marketing protection or data protection.]

(7) In this section—

• “European Patent Convention” means the Convention on the Grant of European Patents,

• [F13 “Regulation (EC) No 1107/2009” means Regulation (EC) No 1107/2009 of the European Parliament and of the Council of 21 October 2009 concerning the placing of plant protection products on the market,]

• “rules” means rules made under section 123 of the Patents Act 1977,

• “specified” means specified in an order made by the Treasury, and

• “supplementary protection certificate” means a certificate issued under—

  (a)

  Council Regulation (EC) No 469/2009 of the European Parliament and of the Council of 6 May 2009 concerning the supplementary protection certificate for medicinal products, or

  (b)

  Regulation (EC) No 1610/96 of the European Parliament and of the Council of 23 July 1996 concerning the creation of a supplementary protection certificate for plant protection products.

(8) The Treasury may by order—

(a) amend this section so as to make provision about the circumstances in which a product benefits from marketing or data protection for the purposes of [F14 subsection (3)];

F15 (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(9) An order made under this section may make any incidental, supplemental, consequential, transitional or saving provision, including provision amending or modifying this Part.

Textual Amendments

F8 Word in s. 357BB(1)(d) inserted (31.12.2020) by The Taxes (Amendments) (EU Exit) (No. 2) Regulations 2019 (S.I. 2019/818), regs. 1(2), 8(3)(a)(i); 2020 c. 1, Sch. 5 para. 1(1)

F9 S. 357BB(1)(f) omitted (31.12.2020) by virtue of The Taxes (Amendments) (EU Exit) (No. 2) Regulations 2019 (S.I. 2019/818), regs. 1(2), 8(3)(a)(ii); 2020 c. 1, Sch. 5 para. 1(1)

F10 S. 357BB(3)-(5) substituted (31.12.2020) by The Taxes (Amendments) (EU Exit) (No. 2) Regulations 2019 (S.I. 2019/818), regs. 1(2), 8(3)(b); 2020 c. 1, Sch. 5 para. 1(1)

F11 Words in s. 357BB(6) substituted (31.12.2020) by The Taxes (Amendments) (EU Exit) (No. 2) Regulations 2019 (S.I. 2019/818), regs. 1(2), 8(3)(c); 2020 c. 1, Sch. 5 para. 1(1)

F12 S. 357BB(6A) inserted (31.12.2020) by The Taxes (Amendments) (EU Exit) (No. 2) Regulations 2019 (S.I. 2019/818), regs. 1(2), 8(3)(d); 2020 c. 1, Sch. 5 para. 1(1)

F13 Words in s. 357BB(7) inserted (31.12.2020) by The Taxes (Amendments) (EU Exit) (No. 2) Regulations 2019 (S.I. 2019/818), regs. 1(2), 8(3)(e); 2020 c. 1, Sch. 5 para. 1(1)

F14 Words in s. 357BB(8)(a) substituted (31.12.2020) by The Taxes (Amendments) (EU Exit) (No. 2) Regulations 2019 (S.I. 2019/818), regs. 1(2), 8(3)(f)(i); 2020 c. 1, Sch. 5 para. 1(1)

F15 S. 357BB(8)(b) omitted (31.12.2020) by virtue of The Taxes (Amendments) (EU Exit) (No. 2) Regulations 2019 (S.I. 2019/818), regs. 1(2), 8(3)(f)(ii); 2020 c. 1, Sch. 5 para. 1(1)

[F16 357BBA. Rights to which this Part applies: EU rights U.K.

(1) This Part applies to the following rights—

(a) an EU supplementary protection certificate, and

(b) any Community plant variety rights granted under Council Regulation (EC) No 2100/94.

(2) Where—

(a) a person holds a marketing authorisation in respect of any product in accordance with any legislation having effect in EU law, and

(b) the product benefits from EU marketing protection (see subsection (3)) or EU data protection (see subsection (4)),

the person is to be treated for the purposes of this Part as having been granted a right to which this Part applies in respect of the product.

(3) A product benefits from EU marketing protection if—

(a) the product benefits from marketing protection by virtue of Article 14.11 of Regulation (EC) No 726/2004 of the European Parliament and of the Council of 31 March 2004 laying down Community procedures for the authorisation and supervision of medical products for human use, or

(b) any of the following prohibitions is in force—

(i) the prohibition on placing on the market a generic of the product imposed by Article 10.1 of Directive 2001/83/EC of the European Parliament and of the Council of 6 November 2001 on the Community code relating to medicinal products for human use,

(ii) the prohibition imposed by Article 8.1 of Regulation (EC) No 141/2000 of the European Parliament and the Council of 16 December 1999 on orphan medicinal products, and

(iii) the prohibition on placing on the market a generic of the product imposed by Article 13.1 of Directive 2001/82/EC of the European Parliament and of the Council of 6 November 2001 on the Community code relating to veterinary medicinal products.

(4) A product benefits from EU data protection if—

(a) the product benefits from the data exclusivity conferred by Article 10.5 of Directive 2001/83/EC of the European Parliament and of the Council,

(b) the prohibition on referring to the results of tests or trials in relation to the product imposed by Article 74a of that Directive is in force, or

(c) data relating to the product benefits from data protection under Article 59 of Regulation (EC) No 1107/2009 of the European Parliament and of the Council of 21 October 2009 concerning the placing of plant protection products on the market.

(5) The reference to data in subsection (4)(c) does not include a study necessary for the renewal or review of a marketing authorisation granted in respect of the product in accordance with Regulation (EC) No 1107/2009.

(6) In this section “EU supplementary protection certificate” means a certificate issued under—

(a) Regulation (EC) No 469/2009 of the European Parliament and of the Council of 6 May 2009 concerning the supplementary protection certificate for medicinal products, or

(b) Regulation (EC) No 1610/96 of the European Parliament and of the Council of 23 July 1996 concerning the creation of a supplementary protection certificate for plant protection products.

(7) A reference in this section to any EU legislation is a reference to that legislation as it has effect in EU law.

(8) The Treasury may by regulations—

(a) amend this section so as to make provision about the circumstances in which a product benefits from EU marketing protection or EU data protection for the purposes of subsection (2);

(b) make such provision amending any reference in this section to EU legislation as appears to the Treasury appropriate in consequence of any EU legislation amending or replacing that EU legislation.

(9) Regulations under subsection (8) may make any incidental, supplemental, consequential, transitional or saving provision, including provision amending or modifying this Part.]

Textual Amendments

F16 S. 357BBA inserted (31.12.2020) by The Taxes (Amendments) (EU Exit) (No. 2) Regulations 2019 (S.I. 2019/818), regs. 1(2), 8(4); 2020 c. 1, Sch. 5 para. 1(1)

357BC The development condition U.K.

(1) A company meets the development condition in relation to a right if condition A, B, C or D is met.

Section 357BD (meaning of “qualifying development”) applies for the purposes of this section.

(2) Condition A is that—

(a) the company has at any time carried out qualifying development in relation to the right, and

(b) the company has not ceased to be, or become, a controlled member of a group since that time.

(3) Condition B is that—

(a) the company has at any time carried out qualifying development in relation to the right,

(b) the company has ceased to be, or become, a controlled member of a group since that time,

(c) the company has, for a period of 12 months beginning with the day on which it ceased to be, or became, a controlled member of the group, performed activities of the same description as those that constituted the qualifying development, and

(d) the company remains a member of that group or (as the case may be) does not become a controlled member of any other group.

(4) Condition C is that—

(a) the company is a member of a group,

(b) another company that is or has been a member of the group has carried out qualifying development in relation to the right, and

(c) that other company was a member of the group at the time it carried out the qualifying development.

(5) Condition D is that—

(a) the company is a member of a group,

(b) another company that is or has been a member of the group has carried out qualifying development in relation to the right,

(c) that other company (“T”) or, where another member of the group begins to carry on the trade which T carried on immediately before becoming a member of the group, either or both of those companies have, while carrying on that trade as a member of the group, performed activities of the same description as those that constituted the qualifying development, and

(d) those activities of those companies, taken together, have been performed for a period of 12 months beginning with the day on which T became a member of the group.

(6) For the purposes of conditions A and B, a company becomes a controlled member of a group at any time if—

(a) another company (“P”) either becomes the holder of a major interest in the company, or begins to control the company, at that time, and

(b) immediately before that time the company was not associated with P or with any company associated with P immediately before that time.

(7) For the purposes of conditions A and B, a company ceases to be a controlled member of a group at any time if—

(a) every other company which immediately before that time held a major interest in, or controlled, the company ceases to do so, and

(b) as a result the company ceases to be associated with any of those companies.

(8) Where—

(a) a company ceases to be a controlled member of a group at any time, and

(b) at that time the company holds a major interest in, or controls, any other company,

that other company is to be treated for the purposes of conditions A and B as also having ceased to be a controlled member of the group at that time.

(9) In subsections (6) and (7) “associated” is to be read in accordance with section 357GD(3).

(10) The following provisions apply for the purposes of subsections (6) to (8)—

• section 472 of CTA 2009 (meaning of “control”), and

• sections 473 and 474 of CTA 2009 (meaning of “major interest”).

(11) A company that meets the development condition in relation to a right by virtue of the performance of the activities mentioned in subsection (3) or (5) for the period of 12 months so mentioned is to be regarded as meeting that condition in relation to the right during that period (as well as at any other time when the company meets the condition).

357BD Meaning of “qualifying development” U.K.

(1) A company carries out “qualifying development” in relation to a right if—

(a) it creates, or significantly contributes to the creation of, the invention, or

(b) it performs a significant amount of activity for the purposes of developing the invention or any item or process incorporating the invention.

(2) The reference in subsection (1)(b) to developing the invention includes developing ways in which the invention may be used or applied.

(3) For the purposes of section 357BC it does not matter whether the qualifying development was carried out before or after—

(a) the company, or

(b) where the company is a member of a group, any member of the group,

became the holder of the right or (as the case may be) an exclusive licence in respect of the right.

357BE The active ownership condition U.K.

(1) A company meets the active ownership condition for an accounting period if all or almost all of the qualifying IP rights held by the company in that accounting period are rights in respect of which condition A or B is met.

(2) Condition A is that during the accounting period the company performs a significant amount of management activity in relation to the rights.

(3) In subsection (2) “management activity”, in relation to any qualifying IP rights, means formulating plans and making decisions in relation to the development or exploitation of the rights.

(4) Condition B is that the company meets the development condition in relation to the rights by virtue of section 357BC(2) or (3).

(5) Any reference in this section to a qualifying IP right held by the company includes a reference to a qualifying IP right in respect of which the company holds an exclusive licence.

[F17 CHAPTER 2A U.K. Relevant IP profits: cases mentioned in section 357A(6)

Textual Amendments

F17 Pt. 8A Chs. 2A, 2B inserted (with effect in accordance with s. 64(7) of the amending Act) by Finance Act 2016 (c. 24), s. 64(3)

Steps for calculating relevant IP profits of a trade U.K.

357BF Relevant IP profits U.K.

(1) This section applies for the purposes of determining the relevant IP profits of a trade of a company for an accounting period in a case where—

(a) the accounting period begins on or after 1 July 2021, or

(b) the company is a new entrant (see section 357A(11)).

(2) To determine the relevant IP profits—

• Step 1 Take any amounts which are brought into account as credits in calculating the profits of the trade for the accounting period, other than any amounts of finance income (see section 357BG), and divide them into two “streams”, amounts of relevant IP income (see sections 357BH to 357BHC) and amounts that are not amounts of relevant IP income. The stream consisting of relevant IP income is “the relevant IP income stream”; the other stream is the “standard income stream”.

• Step 2 Divide the relevant IP income stream into “relevant IP income sub-streams” so that each sub-stream is—

  (a)

  a sub-stream consisting of income properly attributable to a particular qualifying IP right (an “individual IP right sub-stream”),

  (b)

  a sub-stream consisting of income properly attributable to a particular kind of IP item (a “product sub-stream”), or

  (c)

  a sub-stream consisting of income properly attributable to a particular kind of IP process (a “process sub-stream”).

  See subsection (5) for the meaning of “IP item” and “IP process” and see subsections (6) and (7) for further provision in connection with product sub-streams and process sub-streams.

• Step 3 Take any amounts which are brought into account as debits in calculating the profits of the trade for the accounting period, other than any excluded debits (see section 357BI), and allocate them on a just and reasonable basis between the standard income stream and each of the relevant IP income sub-streams.

• Step 4 Deduct from each relevant IP income sub-stream—

  (a)

  the amounts allocated to the sub-stream at Step 3, and

  (b)

  the routine return figure for the sub-stream (see section 357BJ).

  But see section 357BIA (which provides that certain amounts allocated to a relevant IP income sub-stream at Step 3 are not to be deducted from the sub-stream at this Step).

• Step 5 Deduct from each relevant IP income sub-stream which is greater than nil following Step 4 the marketing assets return figure for the sub-stream (see section 357BK).

• Step 6 Multiply the amount of each relevant IP income sub-stream (following the deductions required at Steps 4 and 5) by the R&D fraction for the sub-stream (see section 357BL).

• Step 7 Add together the amounts of the relevant IP income sub-streams (following Step 6).

• Step 8 If the company has made an election under section 357BM (which provides in certain circumstances for profits arising before the grant of a right to be treated as relevant IP profits), add to the amount given by Step 7 any amount determined in accordance with subsection (3) of that section.

(3) If the amount given by subsection (2) is greater than nil, that amount is the relevant IP profits of the trade for the accounting period.

(4) If the amount given by subsection (2) is less than nil, that amount is the relevant IP losses of the trade for the accounting period (see Chapter 5).

(5) In this section—

• “IP item” means—

  (a)

  an item in respect of which a qualifying IP right held by the company has been granted, or

  (b)

  an item which incorporates one or more items within paragraph (a);

• “IP process” means—

  (a)

  a process in respect of which a qualifying IP right held by the company has been granted, or

  (b)

  a process which incorporates one or more processes within paragraph (a).

(6) For the purposes of this section two or more IP items, or two or more IP processes, may be treated as being of a particular kind if they are intended to be, or are capable of being, used for the same or substantially the same purposes.

(7) Income may be allocated at Step 2 of subsection (2) to a product sub-stream or process sub-stream only if—

(a) it would not be reasonably practicable to apportion the income between individual IP right sub-streams, or

(b) it would be reasonably practicable to do that but doing so would result in it not being reasonably practicable to apply any of the remaining steps in subsection (2).

(8) Any reference in this section to a qualifying IP right held by the company includes a reference to a qualifying IP right in respect of which the company holds an exclusive licence.

Finance income U.K.

357BG Finance income U.K.

(1) For the purposes of this Part “finance income”, in relation to a trade of a company, means—

(a) any credits which are treated as receipts of the trade by virtue of—

(i) section 297 of CTA 2009 (credits in respect of loan relationships), or

(ii) section 573 of CTA 2009 (credits in respect of derivative contracts),

(b) any amount which in accordance with generally accepted accounting practice falls to be recognised as arising from a financial asset, and

(c) any return, in relation to an amount, which—

(i) is produced for the company by an arrangement to which it is a party, and

(ii) is economically equivalent to interest.

(2) In subsection (1)—

• “economically equivalent to interest” is to be construed in accordance with section 486B(2) and (3) of CTA 2009, and

• “financial asset” means a financial asset as defined for the purposes of generally accepted accounting practice.

(3) For the purposes of subsection (1)(c), the amount of a return is the amount which by virtue of the return would, in calculating the company's chargeable profits, be treated under section 486B of CTA 2009 (disguised interest to be regarded as profit from loan relationship) as profit arising to the company from a loan relationship.

But, in calculating that profit for the purposes of this subsection, sections 486B(7) and 486C to 486E of that Act are to be ignored.

Relevant IP income U.K.

357BH Relevant IP income U.K.

(1) For the purposes of this Part “relevant IP income” means income falling within any of the Heads set out in—

(a) subsection (2) (sales income),

(b) subsection (6) (licence fees),

(c) subsection (7) (proceeds of sale etc),

(d) subsection (8) (damages for infringement), and

(e) subsection (9) (other compensation).

This is subject to section 357BHB (excluded income).

(2) Head 1 is income arising from the sale by the company of any of the following items—

(a) items in respect of which a qualifying IP right held by the company has been granted (“qualifying items”);

(b) items incorporating one or more qualifying items;

(c) items that are wholly or mainly designed to be incorporated into items within paragraph (a) or (b).

(3) For the purposes of this Part an item and its packaging are not to be treated as a single item, unless the packaging performs a function that is essential for the use of the item for the purposes for which it is intended to be used.

(4) In subsection (3) “packaging”, in relation to an item, means any form of container or other packaging used for the containment, protection, handling, delivery or presentation of the item, including by way of attaching the item to, or winding the item round, some other article.

(5) In a case where a qualifying item and an item that is designed to incorporate that item (“the parent item”) are sold together as, or as part of, a single unit for a single price, the reference in subsection (2)(b) to an item incorporating a qualifying item includes a reference to the parent item.

(6) Head 2 is income consisting of any licence fee or royalty which the company receives under an agreement granting another person any of the following rights only—

(a) a right in respect of any qualifying IP right held by the company,

(b) any other right in respect of a qualifying item or process, and

(c) in the case of an agreement granting any right within paragraph (a) or (b), a right granted for the same purposes as those for which that right was granted.

In this subsection “qualifying process” means a process in respect of which a qualifying IP right held by the company has been granted.

(7) Head 3 is any income arising from the sale or other disposal of a qualifying IP right or an exclusive licence in respect of such a right.

(8) Head 4 is any amount received by the company in respect of an infringement, or alleged infringement, of a qualifying IP right held by the company at the time of the infringement or alleged infringement.

(9) Head 5 is any amount of damages, proceeds of insurance or other compensation, other than an amount in respect of an infringement or alleged infringement of a qualifying IP right, which is received by the company in respect of an event and—

(a) is paid in respect of any items that fell within subsection (2) at the time of that event, or

(b) represents a loss of income which would, if received by the company at the time of that event, have been relevant IP income.

(10) But income is not relevant IP income by virtue of subsection (8) or (9) unless the event in respect of which the income is received, or any part of that event, occurred at a time when—

(a) the company was a qualifying company, and

(b) an election under section 357A(1) had effect in relation to it.

(11) In a case where the whole of that event does not occur at such a time, subsection (8) or (9) (as the case may be) applies only to so much of the amount received by the company in respect of the event as on a just and reasonable apportionment is properly attributable to such a time.

(12) Any reference in this section to a qualifying IP right held by the company includes a reference to a qualifying IP right in respect of which the company holds an exclusive licence.

357BHA Notional royalty U.K.

(1) This section applies where—

(a) a company holds a qualifying IP right or an exclusive licence in respect of a qualifying IP right,

(b) the qualifying IP right falls within paragraph (a), (b) or (c) of section 357BB(1), and

(c) the income of a trade of the company for an accounting period includes income (“IP-derived income”) which—

(i) arises from things done by the company that involve the exploitation by the company of the qualifying IP right, and

(ii) is not relevant IP income, finance income or excluded income.

(2) The company may elect that the appropriate percentage of the IP-derived income is to be treated for the purposes of this Part as if it were relevant IP income.

(3) The “appropriate percentage” is the proportion of the IP-derived income which the company would pay another person (“P”) for the right to exploit the qualifying IP right in the accounting period concerned if the company were not otherwise able to exploit it.

(4) For the purposes of determining the appropriate percentage under this section, assume that—

(a) the company and P are dealing at arm's length,

(b) the company, or the company and persons authorised by it, will have the right to exploit the qualifying IP right to the exclusion of any other person (including P),

(c) the company will have the same rights in relation to the qualifying IP right as it actually has,

(d) the right to exploit the qualifying IP right is conferred on the relevant day,

(e) the appropriate percentage is determined at the beginning of the accounting period concerned,

(f) the appropriate percentage will apply for each succeeding accounting period for which the company will have the right to exploit the qualifying IP right, and

(g) no income other than IP-derived income will arise from anything done by the company that involves the exploitation by the company of the qualifying IP right.

(5) In subsection (4)(d) “the relevant day” means—

(a) the first day of the accounting period concerned, or

(b) if later, the day on which the company first began to hold the qualifying IP right or licence.

(6) In determining the appropriate percentage, the company must act in accordance with—

(a) Article 9 of the OECD Model Tax Convention, and

(b) the OECD transfer pricing guidelines.

(7) In this section “excluded income” means any income falling within either of the Heads in section 357BHB.

357BHB Excluded income U.K.

(1) For the purposes of this Part income falling within either of the Heads set out in the following subsections is not relevant IP income—

(a) subsection (2) (ring fence income),

(b) subsection (3) (income attributable to non-exclusive licences).

(2) Head 1 is income arising from oil extraction activities or oil rights.

In this subsection “oil extraction activities” and “oil rights” have the same meaning as in Part 8 (see sections 272 and 273).

(3) Head 2 is income which on a just and reasonable apportionment is properly attributable to a licence (a “non-exclusive licence”) held by the company which—

(a) is a licence in respect of an item or process, but

(b) is not an exclusive licence in respect of a qualifying IP right.

(4) In a case where—

(a) a company holds an exclusive licence in respect of a qualifying IP right, and

(b) the licence also confers on the company (or on the company and persons authorised by it) any right in respect of the invention otherwise than to the exclusion of all other persons,

the licence is to be treated for the purposes of this Part as if it were two separate licences, one an exclusive licence that does not confer any such rights, and the other a non-exclusive licence conferring those rights.

357BHC Mixed sources of income U.K.

(1) This section applies to any income that—

(a) is mixed income, or

(b) is paid under a mixed agreement.

(2) “Mixed income” means the proceeds of sale where an item falling within subsection (2) of section 357BH and an item not falling within that subsection are sold together as, or as part of, a single unit for a single price.

(3) A “mixed agreement” is an agreement providing for—

(a) one or more of the matters in paragraphs (a) to (c) of subsection (4), and

(b) one or more of the matters in paragraphs (d) to (g) of that subsection.

(4) The matters are—

(a) the sale of an item falling within section 357BH(2),

(b) the grant of any right falling within paragraph (a), (b) or (c) of section 357BH(6),

(c) a sale or disposal falling within section 357BH(7),

(d) the sale of any other item,

(e) the grant of any other right,

(f) any other sale or disposal,

(g) the provision of any services.

(5) So much of the income as on a just and reasonable apportionment is properly attributable to—

(a) the sale of an item falling within section 357BH(2),

(b) the grant of any right falling within paragraph (a), (b) or (c) of section 357BH(6), or

(c) a sale or disposal falling within section 357BH(7),

is to be regarded for the purposes of this Part as relevant IP income.

(6) But where the amount of income that on such an apportionment is properly attributable to any of the matters in paragraphs (d) to (g) of subsection (4) is a trivial proportion of the income to which this section applies, all of that income is to be regarded for the purposes of this Part as relevant IP income.

Excluded debits etc U.K.

357BI Excluded debits U.K.

For the purposes of this Part “excluded debits” means—

(a) the amount of any debits which are treated as expenses of a trade by virtue of—

(i) section 297 of CTA 2009 (debits in respect of loan relationships), or

(ii) section 573 of CTA 2009 (debits in respect of derivative contracts),

(b) the amount of any additional deduction for an accounting period obtained by a company under Part 13 of CTA 2009 for expenditure on research and development in relation to a trade,

(c) the amount of any additional deduction for an accounting period obtained by a company under Part 15A of CTA 2009 in respect of qualifying expenditure on a television programme,

(d) the amount of any additional deduction for an accounting period obtained by a company under Part 15B of CTA 2009 in respect of qualifying expenditure on a video game, and

(e) the amount of any additional deduction for an accounting period obtained by a company under Part 15C of CTA 2009 in respect of qualifying expenditure on a theatrical production.

357BIA Certain amounts not to be deducted from sub-streams at Step 4 of section 357BF U.K.

(1) This section applies where a company enters into an arrangement with a person under which—

(a) the person assigns to the company a qualifying IP right or grants or transfers to the company an exclusive licence in respect of a qualifying IP right, and

(b) the company makes to the person an income-related payment.

(2) A payment is an “income-related payment” for the purposes of subsection (1) if—

(a) the obligation to make the payment arises under the arrangement by reason of the amount of income the company has accrued which is properly attributable to the right or licence, or

(b) the amount of the payment is determined under the arrangement by reference to the amount of income the company has accrued which is so attributable.

(3) If the amount of the income-related payment is allocated to a relevant IP income sub-stream at Step 3 of section 357BF(2), the amount is not to be deducted from the sub-stream at Step 4 of section 357BF(2) unless the payment will not affect the R&D fraction for the sub-stream.”

Routine return figure U.K.

357BJ Routine return figure U.K.

(1) This section applies for the purpose of calculating the routine return figure for a relevant IP income sub-stream established at Step 2 in section 357BF(2) in determining the relevant IP profits of a trade of a company for an accounting period.

(2) The routine return figure for the sub-stream is 10% of the aggregate of any routine deductions which—

(a) have been made by the company in calculating the profits of the trade for the accounting period, and

(b) have been allocated to the sub-stream at Step 3 in section 357BF(2).

For the meaning of “routine deductions”, see sections 357BJA and 357BJB.

(3) In a case where—

(a) the company (“C”) is a member of a group,

(b) another member of the group has incurred expenses on behalf of C,

(c) had they been incurred by C, C would have made a deduction in respect of the expenses in calculating the profits of the trade for the accounting period,

(d) the deduction would have been a routine deduction, and

(e) the deduction would have been allocated to the sub-stream at Step 3 in section 357BF(2),

C is to be treated for the purposes of subsection (2) as having made such a routine deduction and as having allocated the deduction to the sub-stream.

(4) Where expenses have been incurred by any member of the group on behalf of C and any other member of the group, subsection (3) applies in relation to so much of the amount of the expenses as on a just and reasonable apportionment may properly be regarded as incurred on behalf of C.

357BJA Routine deductions U.K.

(1) For the purposes of this Part, “routine deductions” means deductions falling within any of the Heads set out in—

(a) subsection (2) (capital allowances),

(b) subsection (3) (costs of premises),

(c) subsection (4) (personnel costs),

(d) subsection (5) (plant and machinery costs),

(e) subsection (6) (professional services), and

(f) subsection (7) (miscellaneous services).

This is subject to section 357BJB (deductions that are not routine deductions).

(2) Head 1 is any allowances under CAA 2001.

(3) Head 2 is any deductions made by the company in respect of any premises occupied by the company.

(4) Head 3 is any deductions made by the company in respect of—

(a) any director or employee of the company, or

(b) any externally provided workers.

(5) Head 4 is any deductions made by the company in respect of any plant or machinery used by the company.

(6) Head 5 is any deductions made by the company in respect of any of the following services—

(a) legal services, other than IP-related services;

(b) financial services, including—

(i) insurance services, and

(ii) valuation or actuarial services;

(c) services provided in connection with the administration or management of the company's directors and employees;

(d) any other consultancy services.

(7) Head 6 is any deductions made by the company in respect of any of the following services—

(a) the supply of water, fuel or power;

(b) telecommunications services;

(c) computing services, including computer software;

(d) postal services;

(e) the transportation of any items;

(f) the collection, removal and disposal of refuse.

(8) In this section—

• “externally provided worker” has the same meaning as in Part 13 of CTA 2009 (see section 1128 of that Act),

• “IP-related services” means services provided in connection with—

  (a)

  any application for a right to which this Part applies, or

  (b)

  any proceedings relating to the enforcement of any such right,

• “premises” includes any land,

• “telecommunications service” means any service that consists in the provision of access to, and of facilities for making use of, any telecommunication system (whether or not one provided by the person providing the service), and

• “telecommunication system” means any system (including the apparatus comprised in it) which exists for the purpose of facilitating the transmission of communications by any means involving the use of electrical or electromagnetic energy.

(9) The Treasury may by regulations amend this section.

357BJB Deductions that are not routine deductions U.K.

(1) For the purposes of this Part a deduction is not a “routine deduction” if it falls within any of the Heads set out in—

(a) subsection (2) (loan relationships and derivative contracts),

(b) subsection (3) (R&D expenses),

(c) subsection (4) (capital allowances for R&D or patents),

(d) subsection (5) (R&D-related employee share acquisitions),

[F18 (da) subsection (7A) (expenditure on the production of films, television programmes and video games),]

(e) subsection (8) (television production expenditure),

(f) subsection (9) (video games development expenditure).

(2) Head 1 is any debits which are treated as expenses of the trade by virtue of—

(a) section 297 of CTA 2009 (debits in respect of loan relationships), or

(b) section 573 of CTA 2009 (debits in respect of derivative contracts).

(3) Head 2 is—

(a) the amount of any expenditure on research and development in relation to the trade—

(i) for which an additional deduction for the accounting period is obtained by the company under Part 13 of CTA 2009, or

(ii) in respect of which the company is entitled to an R&D expenditure credit for the accounting period under [F19 Chapter 1A of that Part], and

(b) where the company obtains an additional deduction as mentioned in paragraph (a)(i), the amount of that additional deduction.

(4) Head 3 is any allowances under—

(a) Part 6 of CAA 2001 (research and development allowances), or

(b) Part 8 of CAA 2001 (patent allowances).

(5) Head 4 is the appropriate proportion of any deductions allowed under Part 12 of CTA 2009 (relief for employee share acquisitions) in a case where—

(a) shares are acquired by an employee or another person because of the employee's employment by the company, and

(b) the employee is wholly or partly engaged directly and actively in relevant research and development (within the meaning of section 1042 of CTA 2009).

(6) In subsection (5) “the appropriate proportion”, in relation to a deduction allowed in respect of an employee, is the proportion of the staffing costs in respect of the employee which are attributable to relevant research and development for the purposes of Part 13 of CTA 2009 (see section 1124 of that Act).

“Staffing costs” has the same meaning as in that Part (see section 1123 of that Act).

(7) Subsections (5) and (6) of section 1124 of CTA 2009 apply for the purposes of subsection (5)(b) as they apply for the purposes of that section.

[F20 (7A) Head 4A is the amount of any expenditure in respect of which the company is entitled to an audiovisual expenditure credit or video game expenditure credit under Part 14A of CTA 2009.]

(8) Head 5 is—

(a) the amount of any qualifying expenditure on a television programme for which an additional deduction for the accounting period is obtained by the company under Part 15A of CTA 2009, and

(b) the amount of that additional deduction.

(9) Head 6 is—

(a) the amount of any qualifying expenditure on a video game for which an additional deduction for the accounting period is obtained by the company under Part 15B of CTA 2009, and

(b) the amount of that additional deduction.

(10) The Treasury may by regulations amend this section.

Textual Amendments

F18 S. 357BJB(1)(da) inserted (22.2.2024) by Finance Act 2024 (c. 3), Sch. 2 para. 6(3)(a)(i) (with Sch. 2 paras. 16(1), 17-25)

F19 Words in s. 357BJB(3)(a)(ii) substituted (1.4.2024 with effect in relation to accounting periods beginning on or after that date) by Finance Act 2024 (c. 3), Sch. 1 paras. 13(3)(a), 16; S.I. 2024/286, reg. 2

F20 S. 357BJB(7A) inserted (22.2.2024) by Finance Act 2024 (c. 3), Sch. 2 para. 6(3)(a)(ii) (with Sch. 2 paras. 16(1), 17-25)

Marketing assets return figure U.K.

357BK Marketing assets return figure U.K.

(1) The marketing assets return figure for a relevant IP income sub-stream is—

where—

NMR is the notional marketing royalty in respect of the sub-stream (see section 357BKA), and

AMR is the actual marketing royalty in respect of the sub-stream (see section 357BKB).

(2) Where—

(a) AMR is greater than NMR, or

(b) the difference between NMR and AMR is less than 10% of the amount of the relevant IP income sub-stream following the deductions required by Step 4 in section 357BF(2),

the marketing assets return figure for the sub-stream is nil.

357BKA Notional marketing royalty U.K.

(1) The notional marketing royalty in respect of a relevant IP income sub-stream is the appropriate percentage of the income allocated to that sub-stream at Step 2 in section 357BF(2).

(2) The “appropriate percentage” is the proportion of that income which the company would pay another person (“P”) for the right to exploit the relevant marketing assets in the accounting period concerned if the company were not otherwise able to exploit them.

(3) For the purposes of this section a marketing asset is a “relevant marketing asset” in relation to a relevant IP income sub-stream if the sub-stream includes any income arising from things done by the company that involve the exploitation by the company of that marketing asset.

(4) For the purpose of determining the appropriate percentage under this section, assume that—

(a) the company and P are dealing at arm's length,

(b) the company, or the company and persons authorised by it, will have the right to exploit the relevant marketing assets to the exclusion of any other person (including P),

(c) the company will have the same rights in relation to the relevant marketing assets as it actually has,

(d) the right to exploit the relevant marketing assets is conferred on the relevant day,

(e) the appropriate percentage is determined at the beginning of the accounting period concerned,

(f) the appropriate percentage will apply for each succeeding accounting period for which the company will have the right to exploit the relevant marketing assets, and

(g) no income other than income within the relevant IP income sub-stream will arise from anything done by the company that involves the exploitation by the company of the relevant marketing assets.

(5) In subsection (4)(d) “the relevant day”, in relation to a relevant marketing asset, means—

(a) the first day of the accounting period concerned, or

(b) if later, the day on which the company first acquired the relevant marketing asset or the right to exploit the asset.

(6) In determining the appropriate percentage, the company must act in accordance with—

(a) Article 9 of the OECD Model Tax Convention, and

(b) the OECD transfer pricing guidelines.

(7) In this section “marketing asset” means any of the following (whether or not capable of being transferred or assigned)—

(a) anything in respect of which proceedings for passing off could be brought, including a registered trade mark (within the meaning of the Trade Marks Act 1994),

(b) anything that corresponds to a marketing asset within paragraph (a) and is recognised under the law of a country or territory outside the United Kingdom,

(c) any signs or indications (so far as not falling within paragraph (a) or (b)) which may serve, in trade, to designate the geographical origin of goods or services, and

(d) any information which relates to customers or potential customers of the company, or any other member of a group of which the company is a member, and is intended to be used for marketing purposes.

357BKB Actual marketing royalty U.K.

(1) The actual marketing royalty for a relevant IP income sub-stream is the aggregate of any sums which—

(a) were paid by the company for the purposes of acquiring any relevant marketing assets or the right to exploit any such assets, and

(b) have been allocated to the sub-stream at Step 3 in section 357BF(2).

(2) In this section “relevant marketing asset” has the same meaning as in section 357BKA.

R&D fraction U.K.

357BL Introduction U.K.

(1) Sections 357BLA to 357BLH apply for the purpose of determining the R&D fraction for a relevant IP income sub-stream established at Step 2 in section 357BF(2) in determining the relevant IP profits of a trade of a company for an accounting period.

(2) In sections 357BLA to 357BLH, references to “the sub-stream”, “the trade”, “the company” and “the accounting period” are to the relevant IP income sub-stream, the trade, the company and the accounting period referred to in subsection (1).

357BLA The R&D fraction U.K.

(1) The R&D fraction for the sub-stream is the lesser of 1 and—

where—

D is the company's qualifying expenditure on relevant R&D undertaken in-house (see section 357BLB),

S1 is the company's qualifying expenditure on relevant R&D sub-contracted to unconnected persons (see section 357BLC),

S2 is the company's qualifying expenditure on relevant R&D sub-contracted to connected persons (see section 357BLD), and

A is the company's qualifying expenditure on the acquisition of relevant qualifying IP rights (see section 357BLE).

(2) This section is subject to section 357BLH (R&D fraction: increase for exceptional circumstances).

357BLB Qualifying expenditure on relevant R&D undertaken in-house U.K.

(1) In section 357BLA, the company's “qualifying expenditure on relevant R&D undertaken in-house” means the expenditure incurred by the company during the relevant period which meets conditions A and B.

(2) Condition A is that the expenditure is—

(a) incurred on staffing costs,

(b) incurred on software [F21 , data licences, cloud computing services] or consumable items,

(c) qualifying expenditure on externally provided workers, or

(d) incurred on relevant payments to the subjects of clinical trials.

(3) Condition B is that the expenditure is attributable to relevant research and development undertaken by the company itself.

(4) If an election made by the company under section 18A of CTA 2009 (election for exemption for profits or losses of company's foreign permanent establishments) applies to the relevant period, expenditure incurred by the company during the period which meets conditions A and B—

(a) is not “qualifying expenditure on relevant R&D undertaken in-house”, but

(b) is “qualifying expenditure on relevant R&D sub-contracted to connected persons”,

so far as it is expenditure brought into account in calculating a relevant profits amount, or a relevant losses amount, aggregated at section 18A(4)(a) or (b) of CTA 2009 in calculating the company's foreign permanent establishments amount for the period.

(5) In this section and sections 357BLC and 357BLD, “relevant research and development” means research and development (within the meaning of section 1138) which—

(a) in a case where the sub-stream is an individual IP right sub-stream, relates to the qualifying IP right to which the income in the sub-stream is attributable,

(b) in a case where the sub-stream is a product sub-stream, relates to a qualifying IP right granted in respect of any item—

(i) to which income in the sub-stream is attributable, or

(ii) which is incorporated in an item to which income in the sub-stream is attributable, or

(c) in a case where the sub-stream is a process sub-stream, relates to a qualifying IP right granted in respect of any process—

(i) to which income in the sub-stream is attributable, or

(ii) which is incorporated in a process to which income in the sub-stream is attributable.

(6) Research and development “relates” to a qualifying IP right for the purposes of subsection (5) if—

(a) it creates, or contributes to the creation of, the invention,

(b) it is undertaken for the purpose of developing the invention,

(c) it is undertaken for the purpose of developing ways in which the invention may be used or applied, or

(d) it is undertaken for the purpose of developing any item or process incorporating the invention.

(7) The following provisions of CTA 2009 apply for the purposes of this section—

(a) section 1123 (meaning of “staffing costs”),

(b) section 1124 (when staffing costs are attributable to relevant research and development),

(c) section 1125 (meaning of “software [F22 , data licences, cloud computing services] or consumable items”),

(d) sections 1126 to 1126B (when software [F23 , data licences, cloud computing services] or consumable items are attributable to relevant research and development),

(e) sections 1127 to 1131 (meaning of “qualifying expenditure on externally provided workers”), [F24 as those provisions had effect before the amendments made by paragraph 9 of Schedule 1 to FA 2024,]

(f) section 1132 (when qualifying expenditure on externally provided workers is attributable to relevant research and development), and

(g) section 1140 (meaning of “relevant payments to the subjects of clinical trials”),

and in the application of those provisions for the purposes of this section any reference to “relevant research and development” is to be read as a reference to relevant research and development within the meaning given by subsection (5).

Textual Amendments

F21 Words in s. 357BLB(2)(b) inserted (with effect in relation to accounting periods beginning on or after 1.4.2023) by Finance (No. 2) Act 2023 (c. 30), Sch. 1 para. 9(a), 20

F22 Words in s. 357BLB(7)(c) inserted (with effect in relation to accounting periods beginning on or after 1.4.2023) by Finance (No. 2) Act 2023 (c. 30), Sch. 1 para. 9(b)(i), 20

F23 Words in s. 357BLB(7)(d) inserted (with effect in relation to accounting periods beginning on or after 1.4.2023) by Finance (No. 2) Act 2023 (c. 30), Sch. 1 para. 9(b)(ii), 20

F24 Words in s. 357BLB(7)(e) inserted (1.4.2024 with effect in relation to accounting periods beginning on or after that date of the commencing S.I.) by Finance Act 2024 (c. 3), Sch. 1 paras. 13(3)(b), 16; S.I. 2024/286, reg. 2

357BLC Qualifying expenditure on relevant R&D sub-contracted to unconnected persons U.K.

(1) In section 357BLA, the company's “qualifying expenditure on relevant R&D sub-contracted to unconnected persons” means the expenditure incurred by the company during the relevant period in making payments within subsection (2).

(2) A payment is within this subsection if—

(a) it is made to a person in respect of relevant research and development contracted out by the company to the person, and

(b) the company and the person are not connected (within the meaning given by section 1122).

(3) If an election made by the company under section 18A of CTA 2009 (election for exemption for profits or losses of company's foreign permanent establishments) applies to the relevant period, expenditure incurred by the company during the period in making payments within subsection (2)—

(a) is not “qualifying expenditure on relevant R&D sub-contracted to unconnected persons”, but

(b) is “qualifying expenditure on relevant R&D sub-contracted to connected persons”,

so far as it is expenditure brought into account in calculating a relevant profits amount, or a relevant losses amount, aggregated at section 18A(4)(a) or (b) of CTA 2009 in calculating the company's foreign permanent establishments amount for the period.

(4) Where a payment is made to a person in respect of relevant research and development contracted out to the person and in respect of other matters, so much of the payment as is properly attributable to other matters is to be disregarded for the purposes of this section.

357BLD Qualifying expenditure on relevant R&D sub-contracted to connected persons U.K.

(1) In section 357BLA, the company's “qualifying expenditure on relevant R&D sub-contracted to connected persons” means the total of—

(a) any expenditure which is “qualifying expenditure on relevant R&D sub-contracted to connected persons” as a result of section 357BLB(4) or 357BLC(3) (certain expenditure attributed to company's foreign permanent establishments), and

(b) the expenditure incurred by the company during the relevant period in making payments within subsection (2).

(2) A payment is within this subsection if—

(a) it is made to a person in respect of relevant research and development contracted out by the company to the person, and

(b) the company and the person are connected (within the meaning given by section 1122).

(3) Where a payment is made to a person in respect of relevant research and development contracted out to the person and in respect of other matters, so much of the payment as is properly attributable to other matters is to be disregarded for the purposes of this section.

357BLE Qualifying expenditure on acquisition of relevant qualifying IP rights U.K.

(1) In section 357BLA, the company's “qualifying expenditure on the acquisition of relevant qualifying IP rights” means the expenditure incurred by the company in making during the relevant period payments within any of subsections (2), (3) and (4).

(2) A payment is within this subsection if it is made to a person in respect of the assignment by that person to the company of a relevant qualifying IP right.

(3) A payment is within this subsection if it is made to a person in respect of the grant or transfer by that person to the company of an exclusive licence in respect of a relevant qualifying IP right.

(4) A payment is within this subsection if—

(a) it is made to a person in respect of the disclosure by that person to the company of any item or process, and

(b) the company applies for and is granted a relevant qualifying IP right in respect of that item or process (or any item or process derived from it).

(5) Where the company has incurred expenditure in making a series of payments to a person in respect of a single assignment, grant, transfer or disclosure, each of the payments in the series is to be treated for the purposes of this section as having been made on the date on which the first payment in the series was made.

(6) “Relevant qualifying IP right” means—

(a) in a case where the sub-stream is an individual IP right sub-stream, the qualifying IP right to which the income in the sub-stream is attributable,

(b) in a case where the sub-stream is a product sub-stream, a qualifying IP right granted in respect of an item—

(i) to which income in the sub-stream is attributable, or

(ii) which is incorporated in an item to which income in the sub-stream is attributable, or

(c) in a case where the sub-stream is a process sub-stream, a qualifying IP right granted in respect of a process—

(i) to which income in the sub-stream is attributable, or

(ii) which is incorporated in a process to which income in the sub-stream is attributable.

[F25 357BLEA Cases where the company is a party to a CSA U.K.

(1) Subsection (2) applies if during the relevant period—

(a) the company is a party to a cost-sharing arrangement (see section 357GC),

(b) the company incurs expenditure in making payments under the arrangement that are within section 357BLC(2) by reason of section 357GCZC, and

(c) persons who are not connected with the company make payments under the arrangement to the company in respect of relevant research and development undertaken or contracted out by the company.

(2) So much of the expenditure referred to in paragraph (b) of subsection (1) as is equal to the amount of the payments referred to in paragraph (c) of that subsection is to be disregarded in determining the R&D fraction for the sub-stream.

(3) Subsection (4) applies if during the relevant period—

(a) the company is a party to a cost-sharing arrangement,

(b) the company incurs expenditure in making payments under the arrangement that are within subsection (5), and

(c) the company receives payments under the arrangement that are within subsection (6).

(4) So much of the expenditure referred to in paragraph (b) of subsection (3) as is equal to the amount of the payments referred to in paragraph (c) of that subsection is to be disregarded in determining the R&D fraction for the sub-stream.

(5) A payment is within this subsection if—

(a) it is within section 357BLD(2) by reason of section 357GCZC, or

(b) it is within section 357BLE(2) or (3) by reason of section 357GCZD.

(6) A payment is within this subsection if—

(a) it is made by persons connected with the company in respect of relevant research and development undertaken or contracted out by the company, or

(b) it is made in respect of an assignment to the company of a relevant qualifying IP right or a grant or transfer to the company of an exclusive licence in respect of such a right.]

Textual Amendments

F25 S. 357BLEA inserted (with effect in accordance with s. 23(5) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), s. 23(2)

357BLF Meaning of the “relevant period” etc U.K.

(1) Subsections (2) to (6) define “the relevant period” for the purposes of sections 357BLB to 357BLE.

(2) The “relevant period” is the period which—

(a) ends with the last day of the accounting period, and

(b) begins on the relevant day or such earlier day as the company may elect.

This is subject to subsection (6).

(3) The “relevant day” is 1 July 2013 in a case where—

(a) the accounting period begins before 1 July 2021, and

(b) the company is a new entrant (see section 357A(11)).

(4) The “relevant day” is 1 July 2016 in any other case.

(5) A day elected under subsection (2)(b) must not be more than 20 years before the last day of the accounting period.

(6) If the last day of the accounting period is, or is after, 1 July 2036 the “relevant period” is the period of 20 years ending with that day.

(7) Expenditure incurred by the company is to be treated for the purposes of sections 357BLB to 357BLD as incurred during the relevant period if (and only if) the expenditure is allowable as a deduction in calculating for corporation tax purposes the profits of the trade for an accounting period which falls, in whole or in part, within the relevant period.

357BLG Cases where the company is a new entrant with insufficient information about pre-enactment expenditure U.K.

(1) This section applies if—

(a) the accounting period begins before 1 July 2021 and the company is a new entrant (so that subsection (3) of section 357BLF applies), and

(b) the company has insufficient information about its expenditure in the period which begins with 1 July 2013 and ends with 30 June 2016 to be able to calculate the R&D fraction for the sub-stream.

(2) If the accounting period begins on or after 1 July 2019, the company may elect that, for the purposes of enabling it to determine the R&D fraction for the sub-stream, section 357BLF is to have effect as if in subsection (3) for “1 July 2013” there were substituted “ 1 July 2016 ”.

(3) If the accounting period begins before 1 July 2019 the company may elect that, for the purposes of enabling it to determine the R&D fraction for the sub-stream, sections 357BL to 357BLE are to have effect as if—

(a) any reference in those sections to the relevant period were to the period of three years ending with the last day of the accounting period,

(b) in section 357BLB, for subsections (5) and (6) there were substituted—

“(5) In this section and sections 357BLC and 357BLD, “relevant research and development” means research and development (within the meaning of section 1138) which relates to the trade.”, and

(c) in section 357BLE—

(i) in each of subsections (2), (3) and (4) the word “relevant” were omitted, and

(ii) subsection (6) were omitted.

357BLH R&D fraction: increase for exceptional circumstances U.K.

(1) The company may elect to increase the R&D fraction for the sub-stream by the amount mentioned in subsection (2) if (but for the increase)—

(a) it would not be less than 0.325, and

(b) it would, because of exceptional circumstances, be less than the value fraction for the sub-stream (see subsection (3)).

(2) The amount of the increase referred to in subsection (1) is the amount which is equal to the difference between the R&D fraction (before the increase) and the value fraction.

(3) The “value fraction” for the sub-stream is the fraction which, on a just and reasonable assessment, represents the proportion of the value of the relevant qualifying IP rights which is properly attributable to research and development undertaken at any time—

(a) by the company itself, or

(b) on behalf of the company by persons not connected with it.

(4) An election under subsection (1) is made by the company giving notice to an officer of Revenue and Customs.

(5) The notice must be given on or before the last day on which an amendment of the company's tax return for the accounting period could be made under paragraph 15 of Schedule 18 to FA 1998.

(6) In this section—

• “relevant qualifying IP rights” has the same meaning as in section 357BLE, and

• “research and development” has the meaning given by section 1138.

(7) Section 1122 (meaning of “connected” persons”) applies for the purposes of this section.

Profits arising before grant of right U.K.

357BM Profits arising before grant of right U.K.

(1) This section applies where a company—

(a) holds a right mentioned in paragraph (a), (b) or (c) of section 357BB(1) (rights to which this Part applies) or an exclusive licence in respect of such a right, or

(b) would hold such a right or licence but for the fact that the company disposed of any rights in the invention or (as the case may be) the licence before the right was granted.

(2) The company may elect that, for the purposes of determining the relevant IP profits of a trade of the company for the accounting period in which the right is granted, there is to be added the amount determined in accordance with subsection (3) (the “ additional amount ”).

(3) The additional amount is the difference between—

(a) the aggregate of the relevant IP profits of the trade for each relevant accounting period, and

(b) the aggregate of what the relevant IP profits of the trade for each relevant accounting period would have been if the right had been granted on the relevant day.

(4) For the purposes of determining the additional amount, the amount of any relevant IP profits to which section 357A does not apply by virtue of Chapter 5 (relevant IP losses) is to be disregarded.

(5) In this section “relevant accounting period” means—

(a) the accounting period of the company in which the right is granted, and

(b) any earlier accounting period of the company which meets the conditions in subsection (6).

(6) The conditions mentioned in subsection (5)(b) are—

(a) that it is an accounting period for which an election made by the company under section 357A(1) has effect,

(b) that it is an accounting period for which the company is a qualifying company, and

(c) that it ends on or after the relevant day.

(7) In this section “the relevant day” is the later of—

(a) the first day of the period of 6 years ending with the day on which the right is granted, and

(b) the day on which—

(i) the application for the grant of the right was filed, or

(ii) in the case of a company that holds an exclusive licence in respect of the right, the licence was granted.

(8) Where the company would be a qualifying company for an accounting period but for the fact that the right had not been granted at any time during that accounting period, the company is to be treated for the purposes of this section as if it were a qualifying company for that accounting period.

(9) Where the company would be a qualifying company for the accounting period in which the right was granted but for the fact that the company disposed of the rights or licence mentioned in subsection (1)(b) before the right was granted, the company is to be treated for the purposes of section 357A as if it were a qualifying company for that accounting period.

Small claims treatment U.K.

357BN Small claims treatment U.K.

(1) This section applies where—

(a) a company carries on only one trade during an accounting period,

(b) section 357BF applies for the purposes of determining the relevant IP profits of the trade for the accounting period, and

(c) the qualifying residual profit of the trade for the accounting period does not exceed whichever is the greater of—

(i) £1,000,000, and

(ii) the relevant maximum for the accounting period.

(2) The company may make any of the following elections for the accounting period—

(a) a notional royalty election (see section 357BNA),

(b) a small claims figure election (see section 357BNB), and

(c) a global streaming election (see section 357BNC).

This is subject to subsections (3) and (4).

(3) The company may not make a notional royalty election, a small claims figure election or a global streaming election for the accounting period if—

(a) the qualifying residual profit of the trade for the accounting period exceeds £1,000,000,

(b) section 357BF applied for the purposes of determining the relevant IP profits of the trade for any previous accounting period beginning within the relevant 4-year period, and

(c) the company did not make a notional royalty election, a small claims figure election or (as the case may be) a global streaming election for that previous accounting period.

(4) The company may not make a small claims figure election for the accounting period if—

(a) the qualifying residual profit of the trade for the accounting period exceeds £1,000,000,

(b) section 357C or 357DA applied for the purposes of determining the relevant IP profits of the trade for any previous accounting period beginning within the relevant 4-year period, and

(c) the company did not make an election under section 357CL for small claims treatment for that previous accounting period.

(5) In subsections (3) and (4) “the relevant 4-year period” means the period of 4 years ending with the beginning of the accounting period mentioned in subsection (1)(a).

(6) For the purposes of this section, the “qualifying residual profit” of a trade of a company for an accounting period is the amount which (assuming the company did not make an election under this section) would be equal to the aggregate of the relevant IP income sub-streams established at Step 2 in section 357BF(2) in determining the relevant IP profits of the trade for the accounting period, following the deductions from those sub-streams required by Step 4 in section 357BF(2) (ignoring the amount of any sub-stream which is not greater than nil following those deductions).

(7) For the purposes of this section, the “relevant maximum” for an accounting period of a company is—

(a) in a case where [F26 the company has no associated company] in the accounting period, £3,000,000;

(b) in a case where [F27 one or more companies are related 51% group companies of the company] in the accounting period, the amount given by the formula—

where N is the number of [F28 those associated] companies in relation to which an election under section 357A(1) has effect for the accounting period.

(8) For an accounting period of less than 12 months, the relevant maximum is proportionally reduced.

[F29 (9) The rules in Part 3A (see sections 18E to 18J) which apply for determining whether a company is another company's associated company in an accounting period for the purposes of section 18D apply for the purposes of this section.]

Textual Amendments

F26 Words in s. 357BN(7)(a) substituted (with effect in accordance with Sch. 1 para. 33 of the amending Act) by Finance Act 2021 (c. 26), Sch. 1 para. 20(2)(a)

F27 Words in s. 357BN(7)(b) substituted (with effect in accordance with Sch. 1 para. 33 of the amending Act) by Finance Act 2021 (c. 26), Sch. 1 para. 20(2)(b)

F28 Words in s. 357BN(7) substituted (with effect in accordance with Sch. 1 para. 33 of the amending Act) by Finance Act 2021 (c. 26), Sch. 1 para. 20(2)(c)

F29 S. 357BN(9) inserted (with effect in accordance with Sch. 1 para. 33 of the amending Act) by Finance Act 2021 (c. 26), Sch. 1 para. 20(3)

357BNA Notional royalty election U.K.

(1) Subsection (2) applies where a company has made a notional royalty election for an accounting period under section 357BN(2)(a).

(2) In its application for the purposes of determining the relevant IP profits of the trade of the company for the accounting period, section 357BHA (notional royalty) has effect as if—

(a) in subsection (2) for “the appropriate percentage” there were substituted “ 75% ”, and

(b) subsections (3) to (6) were omitted.

357BNB Small claims figure election U.K.

(1) Subsection (2) applies where a company has made a small claims figure election for an accounting period under section 357BN(2)(b).

(2) In its application for the purposes of determining the relevant IP profits of the trade of the company for the accounting period, section 357BF(2) (steps for calculating relevant IP profits) has effect as if in Step 5—

(a) for “marketing assets return figure” there was substituted “ small claims figure ”, and

(b) for “(see section 357BK)” there was substituted “ (see section 357BNB(3)) ”.

(3) Subsections (4) to (9) apply for the purpose of calculating the small claims figure for a relevant IP income sub-stream established at Step 2 in section 357BF(2) in determining the relevant IP profits of a trade of a company for an accounting period.

(4) If 75% of the qualifying residual profit of the trade for the accounting period is lower than the small claims threshold, the small claims figure for the sub-stream is 25% of the amount of the sub-stream following Step 4 in section 357BF(2).

(5) If 75% of the qualifying residual profit of the trade for the accounting period is higher than the small claims threshold, the small claims figure for the sub-stream is the amount given by—

where—

A is the amount of the sub-stream following the deductions required by Step 4 in section 357BF(2),

QRP is the qualifying residual profit of the trade of the company for the accounting period, and

SCT is the small claims threshold.

(6) If [F30 the company has no associated company] in the accounting period, the small claims threshold is £1,000,000.

(7) If [F31 the company has one or more associated companies] in the accounting period, the small claims threshold is—

where N is the number of [F32 those associated] companies in relation to which an election under section 357A(1) has effect for the accounting period.

(8) For an accounting period of less than 12 months, the small claims threshold is proportionately reduced.

(9) Subsection (6) of section 357BN (meaning of “qualifying residual profit”) applies for the purposes of subsection (4) and (5) of this section.

[F33 (10) The rules in Part 3A (see sections 18E to 18J) which apply for determining whether a company is another company's associated company in an accounting period for the purposes of section 18D apply for the purposes of this section.]

Textual Amendments

F30 Words in s. 357BNB(6) substituted (with effect in accordance with Sch. 1 para. 33 of the amending Act) by Finance Act 2021 (c. 26), Sch. 1 para. 21(2)

F31 Words in s. 357BNB(7) substituted (with effect in accordance with Sch. 1 para. 33 of the amending Act) by Finance Act 2021 (c. 26), Sch. 1 para. 21(3)(a)

F32 Words in s. 357BNB(7) substituted (with effect in accordance with Sch. 1 para. 33 of the amending Act) by Finance Act 2021 (c. 26), Sch. 1 para. 21(3)(b)

F33 S. 357BNB(10) inserted (with effect in accordance with Sch. 1 para. 33 of the amending Act) by Finance Act 2021 (c. 26), Sch. 1 para. 21(4)

357BNC Global streaming election U.K.

(1) Subsection (2) applies where a company has made a global streaming election for an accounting period under section 357BN(2)(c).

(2) In its application for the purpose of determining the relevant IP profits of the trade of the company for the accounting period, this Chapter has effect with the following modifications.

(3) In subsection (2) of section 357BF (relevant IP profits)—

(a) omit Step 2,

(b) in Step 3 for “each of the relevant IP income sub-streams” substitute “ the relevant IP income stream ”,

(c) in Step 4—

(i) in the words before paragraph (a), for “each” substitute “ the ”,

(ii) for “sub-stream”, in each place it occurs, substitute “ stream ”,

(d) in Step 5—

(i) at the beginning insert “ If the relevant IP income stream is greater than nil following Step 4, ”,

(ii) for the words from “each” to “Step 4” substitute “ the stream ”,

(iii) for “sub-stream”, in the second place it occurs, substitute “ stream ”,

(e) in Step 6—

(i) for “each relevant IP income sub-stream” substitute “ the relevant IP income stream ”,

(ii) for “sub-stream”, in the second place it occurs, substitute “ stream ”,

(f) omit Step 7, and

(g) in Step 8 for “given by Step 7” substitute “ of the relevant IP income stream following Step 6 ”.

(4) In subsection (3) of that section for “given by” substitute “ of the relevant IP income stream following the Steps in ”.

(5) In subsection (4) of that section for “given by” substitute “ of the relevant IP income stream following the Steps in ”.

(6) Omit subsections (5) to (7) of that section.

(7) In section 357BIA(3) (certain amounts not to be deducted from sub-streams at Step 4 of section 357BF)—

(a) for “a relevant IP income sub-stream” substitute “ the relevant IP income stream ”;

(b) for “sub-stream”, in the second and third places it occurs, substitute “ stream ”.

(8) In section 357BJ (routine return figure)—

(a) for “sub-stream”, in each place it occurs, substitute “ stream ”, and

(b) in subsection (1) for “Step 2” substitute “ Step 1 ”.

(9) In section 357BK (marketing asset return figure) for “sub-stream”, in each place it occurs, substitute “ stream ”.

(10) In section 357BKA (notional marketing royalty)—

(a) for “sub-stream”, in each place it occurs, substitute “ stream ”, and

(b) in subsection (1) for “Step 2” substitute “ Step 1 ”.

(11) In section 357BKB (actual marketing royalty) for “sub-stream”, in each place it occurs, substitute “ stream ”.

(12) In section 357BL (R&D fraction: introduction)—

(a) for “sub-stream” (in each place it occurs) substitute “ stream ”, and

(b) in subsection (1) for “Step 2” substitute “ Step 1 ”.

(13) In section 357BLA(1) (R&D fraction) for “sub-stream” substitute “ stream ”.

(14) In section 357BLB(5) (qualifying expenditure on relevant R&D undertaken in-house) for the words after “1138)” substitute “ which relates to a qualifying IP right to which income in the stream is attributable ”.

(15) In section 357BLE(6) (qualifying expenditure on acquisition of relevant qualifying IP rights) for the words from “means” to the end substitute “ means a qualifying IP right to which income in the stream is attributable ”.

(16) In section 357BLG (cases where the company is a new entrant with insufficient information about pre-enactment expenditure) for “sub-stream”, in each place it occurs, substitute “ stream ”.

(17) In section 357BLH (R&D fraction: increase for exceptional circumstances) for “sub-stream”, in each place it occurs, substitute “ stream ”.

(18) In section 357BNB (small claims figure election)—

(a) for “sub-stream”, in each place it occurs, substitute “ stream ”, and

(b) in subsection (3) for “Step 2” substitute “ Step 1 ”.

CHAPTER 2B U.K. Relevant IP profits: cases mentioned in section 357A(7): income from new IP

357BO Relevant IP profits U.K.

(1) Section 357BF applies, with the modifications set out in section 357BQ, for the purposes of determining the relevant IP profits of a trade of a company for an accounting period in a case where—

(a) the accounting period begins before 1 July 2021,

(b) the company is not a new entrant (see section 357A(11)), and

(c) any amount of relevant IP income brought into account as a credit in calculating the profits of the trade for the accounting period is properly attributable to a new qualifying IP right (see section 357BP).

(2) Where it is necessary for the purposes of section 357BF, as applied by this section, to determine the R&D fraction for a relevant IP income sub-stream, the company concerned is to be treated for the purposes of sections 357BLF and 357BLG as if it were a new entrant.

(3) Where section 357BF applies by reason of this section for the purposes of determining the relevant IP profits of a trade of a company for an accounting period, the company may not make a global streaming election for the accounting period under section 357BN(2)(c).

357BP Meaning of “new qualifying IP right” and “old qualifying IP right” U.K.

(1) This section applies for the purposes of this Part.

(2) “New qualifying IP right”, in relation to a company, means a qualifying IP right which meets condition A, B or C.

(3) “Old qualifying IP right”, in relation to a company, means a qualifying IP right which does not meet any of those conditions.

(4) Condition A is that the right was granted or issued to the company in response to an application filed on or after the relevant date.

(5) Condition B is that the right was assigned to the company on or after the relevant date.

(6) Condition C is that an exclusive licence in respect of the right was granted to the company on or after the relevant date.

(7) The “relevant date” for the purposes of subsections (4), (5) and (6) is 1 July 2016; but this is subject to subsection (8).

(8) The “relevant date” for the purposes of subsections (5) and (6) is 2 January 2016 if—

(a) the company and the person who assigned the right or granted the licence were connected at the time of the assignment or grant,

(b) the main purpose, or one of the main purposes, of the assignment of the right or the grant of the licence was the avoidance of a foreign tax,

(c) the person who assigned the right or granted the licence was not within the charge to corporation tax at the time of the assignment or grant, and

(d) the person who assigned the right or granted the licence was not liable at the time of the assignment or grant to a foreign tax which is designated for the purposes of this section by regulations made by the Treasury.

(9) Regulations may be made under subsection (8)(d) which designate a foreign tax only if it appears to the Treasury that the tax may be charged at a reduced rate under provisions of the law of the country or territory concerned which correspond to the provisions of this Part.

(10) Regulations may not be made under subsection (8)(d) after 31 December 2016.

(11) In this section “foreign tax” means a tax under the law of a country or territory outside the United Kingdom.

(12) Section 1122 (meaning of “connected” persons) applies for the purposes of this section.

[F34 (13) This section has effect subject to section 357GCZA (qualifying IP right held by another party to a cost-sharing arrangement) and section 357GCZB (exclusive licence held by another party to a cost-sharing arrangement).]

Textual Amendments

F34 S. 357BP(13) inserted (with effect in accordance with s. 23(5) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), s. 23(4)

357BQ The modifications U.K.

(1) The modifications of section 357BF referred to in section 357BO(1) are as follows.

(2) Omit subsection (1).

(3) In subsection (2)—

(a) in Step 2—

(i) before paragraph (a) insert—

“(aa) a sub-stream consisting of income properly attributable to old qualifying IP rights (“an old IP rights sub-stream”),”,

(ii) in paragraph (a) before “qualifying IP right” insert “ new ”,

(iii) in the words after paragraph (c) for “and (7)” substitute “ to (7E) ”,

(b) in Step 6, for “relevant IP income sub-stream” substitute “ individual IP right sub-stream, each product sub-stream and each process sub-stream ”, and

(c) for Step 7 substitute— “Step 7 Add together—

(a) the amount of any old IP rights sub-stream (following Steps 4 and 5), and

(b) the amount of each of the individual IP right sub-streams, each of the product sub-streams and each of the process sub-streams (following Step 6).”

(4) In subsection (7) for paragraph (a) substitute—

“(a) it would not be reasonably practicable to apportion the income between—

(i) individual IP rights sub-streams, or

(ii) individual IP rights sub-streams and an old IP rights sub-stream, or”.

(5) After subsection (7) insert—

“(7A) Subsections (7B) to (7E) apply where—

(a) income which is properly attributable to an IP item or IP process may in accordance with subsection (7) be allocated at Step 2 of subsection (2) to a product sub-stream or process sub-stream, and

(b) the IP item or IP process incorporates—

(i) at least one item or process in respect of which an old qualifying IP right held by the company has been granted, and

(ii) at least one item or process in respect of which a new qualifying IP right held by the company has been granted.

(7B) If—

(a) the value of the IP item or IP process is wholly or mainly attributable to the incorporation in it of the items or processes referred to in subsection (7A)(b)(i), or

(b) the old IP percentage for the IP item or IP process is 80% or more,

the income properly attributable to the IP item or IP process may be treated as if it were properly attributable to old qualifying IP rights only; and, accordingly, the income may be allocated at Step 2 of subsection (2) to an old qualifying IP rights sub-stream (rather than to a product sub-stream or process sub-stream).

(7C) If the old IP percentage for the IP item or IP process is less than 80% but not less than 20%, that percentage of the income which is properly attributable to the IP item or IP process may be treated as if it were properly attributable to old qualifying IP rights only; and, accordingly, that percentage of the income may be allocated at Step 2 of subsection (2) to an old IP rights sub-stream (and the remainder is to be allocated to a product sub-stream or process sub-stream).

(7D) Where by reason of subsection (7C) only part of the income properly attributable to the IP item or IP process is allocated to a product sub-stream or process sub-stream, the IP item or IP process is to be treated, in determining the R&D fraction for the sub-stream, as if it did not incorporate the items or processes referred to in subsection (7A)(b)(i).

(7E) For the purposes of subsection (7B) and (7C), the “old IP percentage” for an IP item or IP process is the percentage found by the following calculation—

where—

O is the number of items or processes incorporated in the IP item or IP process in respect of which an old qualifying IP right held by the company has been granted, and

T is the number of items or processes incorporated in the IP item or IP process in respect of which an old or a new qualifying IP right held by the company has been granted.”]

CHAPTER 3 U.K. Relevant IP profits [F35 : cases mentioned in section 357A(7): no income from new IP]

Textual Amendments

F35 Words in Pt. 8A Ch. 3 heading inserted (15.9.2016) by Finance Act 2016 (c. 24), Sch. 9 para. 3

Steps for calculating relevant IP profits of a trade U.K.

357C Relevant IP profits U.K.

[F36 (A1) This section applies for the purposes of determining the relevant IP profits of a trade of a company for an accounting period in a case where—

(a) the accounting period began before 1 July 2021,

(b) the company is not a new entrant (see section 357A(11)), and

(c) none of the amounts of relevant IP income brought into account as credits in calculating the profits of the trade for the accounting period is properly attributable to a new qualifying IP right (see section 357BP).

But see also section 357D (alternative method of calculating relevant IP profits in such a case).]

(1) To determine the relevant IP profits F37 ...—

• Step 1 Calculate the total gross income of the trade for the accounting period (see section 357CA).

• Step 2 Calculate the percentage (“X%”) given by the following formula—

  

  where—

  “RIPI” is so much of the total gross income of the trade for the accounting period as is relevant IP income (see sections [F38 357BH to 357BHC] ), and

  “TI” is the total gross income of the trade for the accounting period.

• Step 3 Calculate X% of the profits of the trade for the accounting period. If there are no such profits, calculate X% of the losses of the trade (expressed as a negative figure) for the accounting period. In calculating the profits of the trade for the purposes of this step, make any adjustments required by section 357CG (and references in this step to the profits or losses of the trade are to be read subject to any such adjustments).

• Step 4 Deduct from the amount given by Step 3 the routine return figure [F39 in relation to the trade for the accounting period] (see section 357CI). The amount given by this step is the “qualifying residual profit”.

  If the amount of the qualifying residual profit is not greater than nil, go to Step 7.

• Step 5 If the company has [F40 made an election under section 357CL] for small claims treatment, calculate the small claims amount in relation to the trade (see section 357CM). If the company has not, go to Step 6.

• Step 6 Deduct from the qualifying residual profit the marketing assets return figure [F41 in relation to the trade for the accounting period] (see section 357CN).

• Step 7 If the company has made an election under section 357CQ (which provides in certain circumstances for profits arising before the grant of a right to be treated as relevant IP profits), add to the amount given by Step 5 or 6 (or, if the amount of the qualifying residual profit was not greater than nil, Step 4) any amount determined in accordance with subsection (3) of that section.

(2) If the amount given by subsection (1) is greater than nil, that amount is the relevant IP profits of the trade for the accounting period.

(3) If the amount given by subsection (1) is less than nil, that amount is the relevant IP losses of the trade for the accounting period (see Chapter 5).

Textual Amendments

F36 S. 357C(A1) inserted (15.9.2016) by Finance Act 2016 (c. 24), Sch. 9 para. 4(2)

F37 Words in s. 357C(1) omitted (15.9.2016) by virtue of Finance Act 2016 (c. 24), Sch. 9 para. 4(3)(a)

F38 Words in s. 357C(1) substituted (15.9.2016) by Finance Act 2016 (c. 24), Sch. 9 para. 4(3)(b)

F39 Words in s. 357C(1) inserted (15.9.2016) by Finance Act 2016 (c. 24), Sch. 9 para. 4(3)(c)

F40 Words in s. 357C(1) substituted (15.9.2016) by Finance Act 2016 (c. 24), Sch. 9 para. 4(3)(d)

F41 Words in s. 357C(1) inserted (15.9.2016) by Finance Act 2016 (c. 24), Sch. 9 para. 4(3)(e)

Total gross income of trade U.K.

357CA Total gross income of a trade U.K.

(1) For the purposes of this Part the “total gross income” of a trade of a company for an accounting period is the aggregate of the amounts falling within the Heads set out in—

(a) subsection (3) (revenue),

(b) subsection (5) (compensation),

(c) subsection (6) (adjustments),

(d) subsection (7) (proceeds from intangible fixed assets),

(e) subsection (8) (profits from patent rights).

(2) But the total gross income of the trade does not include any finance income (see [F42 section 357BG] ).

(3) Head 1 is any amounts which—

(a) in accordance with generally accepted accounting practice (“GAAP”) are recognised as revenue in the company's profit and loss account or income statement for the accounting period, and

(b) are brought into account as credits in calculating the profits of the trade for the accounting period.

(4) Where the company does not draw up accounts for an accounting period in accordance with GAAP, the reference in subsection (3)(a) to any amounts which in accordance with GAAP are recognised as revenue in the company's profit and loss account or income statement for the accounting period is to be read as a reference to any amounts which would be so recognised if the company had drawn up such accounts for that accounting period.

(5) Head 2 is any amounts of damages, proceeds of insurance or other compensation (so far as not falling within Head 1) which are brought into account as credits in calculating the profits of the trade for the accounting period.

(6) Head 3 is any amounts (so far as not falling within Head 1) which are brought into account as receipts under section 181 of CTA 2009 (adjustment on change of basis) in calculating the profits of the trade for the accounting period.

(7) Head 4 is any amounts (so far as not falling within Head 1) which are brought into account as credits under Chapter 4 of Part 8 of CTA 2009 (realisation of intangible fixed assets) in calculating the profits of the trade for the accounting period.

(8) Head 5 is any profits from the sale by the company of the whole or part of any patent rights held for the purposes of the trade which are taxed under section 912 of CTA 2009 in the accounting period.

Textual Amendments

F42 Words in s. 357CA(2) substituted (15.9.2016) by Finance Act 2016 (c. 24), Sch. 9 para. 5

F43 357CB Finance income U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F43 Ss. 357CB-357CF omitted (15.9.2016) by virtue of Finance Act 2016 (c. 24), Sch. 9 para. 6

Relevant IP income U.K.

F43 357CC Relevant IP income U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F43 Ss. 357CB-357CF omitted (15.9.2016) by virtue of Finance Act 2016 (c. 24), Sch. 9 para. 6

F43 357CD Notional royalty U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F43 Ss. 357CB-357CF omitted (15.9.2016) by virtue of Finance Act 2016 (c. 24), Sch. 9 para. 6

F43 357CE Excluded income U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F43 Ss. 357CB-357CF omitted (15.9.2016) by virtue of Finance Act 2016 (c. 24), Sch. 9 para. 6

F43 357CF Mixed sources of income U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F43 Ss. 357CB-357CF omitted (15.9.2016) by virtue of Finance Act 2016 (c. 24), Sch. 9 para. 6

Calculating profits of trade U.K.

357CG Adjustments in calculating profits of trade U.K.

(1) This section applies for the purposes of determining [F44 under section 357C] the relevant IP profits of a trade of a company for an accounting period.

(2) In calculating the profits of the trade for the accounting period—

(a) there are to be added the amounts in subsection (3), and

(b) there are to be deducted the amounts in subsection (4).

(3) The amounts to be added are—

(a) the amount of any debits which are treated as expenses of the trade by virtue of—

(i) section 297 of CTA 2009 (debits in respect of loan relationships), or

(ii) section 573 of CTA 2009 (debits in respect of derivative contracts), F45 ...

(b) the amount of any additional deduction for the accounting period obtained by the company under Part 13 of CTA 2009 for expenditure on research and development in relation to the trade.

[F46 (c) the amount of any additional deduction for the accounting period obtained by the company under Part 15A of CTA 2009 in respect of qualifying expenditure on a television programme, F47 ...

(d) the amount of any additional deduction for the accounting period obtained by the company under Part 15B of CTA 2009 in respect of qualifying expenditure on a video game] [F48 , and

(e) the amount of any additional deduction for the accounting period obtained by the company under Part 15C of CTA 2009 in respect of qualifying expenditure on a theatrical production.]

(4) The amounts to be deducted are [F49 —

(a) the amount of any R&D expenditure credits (within the meaning of [F50 Chapter 1A of Part 13]) brought into account in calculating the profits of the trade for the accounting period, and]

[F51 (aa) the amount of any audiovisual expenditure credit or video game expenditure credit under Part 14A of CTA 2009 brought into account in calculating the profits of the trade for the accounting period,]

(b) any amounts of finance income brought into account in calculating the profits of the trade for the accounting period.

(For the meaning of “finance income”, see [F52 section 357BG].)

(5) In a case where there is a shortfall in R&D expenditure in relation to the trade for a relevant accounting period (see section 357CH), the amount of R&D expenditure brought into account in calculating the profits of the trade for that accounting period is to be increased by the amount mentioned in section 357CH(2).

[F53 (5A) In a case where—

(a) the company is—

(i) a television production company in relation to a television programme, or

(ii) a video games development company in relation to a video game, and

(b) there is a shortfall in qualifying expenditure in relation to the separate programme trade or (as the case may be) the separate video game trade for a relevant accounting period (see section 357CHA),

the amount of qualifying expenditure brought into account in calculating the profits of the trade for that accounting period is to be increased by the amount mentioned in section 357CHA(2).]

(6) For the purposes of [F54 subsections (5) and (5A)] —

• [F55 “qualifying expenditure”—

• (a)

  in relation to a company that is a television production company, has the same meaning as in Chapter 3 of Part 15A of CTA 2009, F56 ...

  (b)

  in relation to a company that is a video games development company, has the same meaning as in Chapter 3 of Part 15B of that Act] [F57 , and

  (c)

  in relation to a company that is the production company (as defined in section 1217FC of that Act) in relation to a theatrical production, has the same meaning as in Part 15C of that Act,]

• “R&D expenditure” means expenditure on research and development in relation to the trade,

• “relevant accounting period”, in relation to a company, means—

  (a)

  the first accounting period for which—

  (i)

  the company is a qualifying company, and

  (ii)

  an election under [F58 section 357A(1)] has effect in relation to it, and

  (b)

  each accounting period that begins before the end of the period of 4 years beginning with that accounting period, F59 ...

• “research and development” means activities, other than oil and gas exploration and appraisal, that fall to be treated as research and development in accordance with generally accepted accounting practice.

• [F60 “the separate programme trade”, in relation to a television production company, has the same meaning as in Chapter 2 of Part 15A of CTA 2009 (see section 1216B),

• “the separate video game trade”, in relation to a video games development company, has the same meaning as in Chapter 2 of Part 15B of CTA 2009 (see section 1217B),

• “television production company” has the same meaning as in Part 15A of CTA 2009 (see section 1216AE), F61 ...

• [F62 “theatrical production” has the same meaning as in Part 15C of CTA 2009 (see section 1217FA of that Act), and]

• “video games development company” has the same meaning as in Part 15B of CTA 2009 (see section 1217AB).]

Textual Amendments

F44 Words in s. 357CG(1) inserted (15.9.2016) by Finance Act 2016 (c. 24), Sch. 9 para. 7(2)

F45 Word in s. 357CG(3)(a) omitted (with effect in accordance with Sch. 18 para. 23 of the amending Act) by virtue of Finance Act 2013 (c. 29), Sch. 18 paras. 18(2), 22; S.I. 2013/1817, art. 2(2); S.I. 2014/1962, art. 2(3)

F46 S. 357CG(3)(c)(d) inserted (with effect in accordance with Sch. 18 para. 23 of the amending Act) by Finance Act 2013 (c. 29), Sch. 18 paras. 18(2), 22; S.I. 2013/1817, art. 2(2); S.I. 2014/1962, art. 2(3)

F47 Word in s. 357CG(3)(c) omitted (with effect in accordance with Sch. 4 para. 17 of the amending Act) by virtue of Finance Act 2014 (c. 26), Sch. 4 paras. 15(2), 16; S.I. 2014/2228, art. 2

F48 S. 357CG(3)(e) and word inserted (with effect in accordance with Sch. 4 para. 17 of the amending Act) by Finance Act 2014 (c. 26), Sch. 4 paras. 15(2), 16; S.I. 2014/2228, art. 2

F49 Words in s. 357CG(4) inserted (with effect in accordance with Sch. 15 para. 27 of the amending Act) by Finance Act 2013 (c. 29), Sch. 15 para. 10(a)

F50 Words in s. 357CG(4)(a) substituted (1.4.2024 with effect in relation to accounting periods beginning on or after that date) by Finance Act 2024 (c. 3), Sch. 1 paras. 13(3)(c), 16; S.I. 2024/286, reg. 2

F51 S. 357CG(4)(aa) inserted (22.2.2024) by Finance Act 2024 (c. 3), Sch. 2 para. 6(3)(b) (with Sch. 2 paras. 16(1), 17-25)

F52 Words in s. 357CG(4) substituted (15.9.2016) by Finance Act 2016 (c. 24), Sch. 9 para. 7(3)

F53 S. 357CG(5A) inserted (with effect in accordance with Sch. 18 para. 23 of the amending Act) by Finance Act 2013 (c. 29), Sch. 18 paras. 18(3), 22; S.I. 2013/1817, art. 2(2); S.I. 2014/1962, art. 2(3)

F54 Words in s. 357CG(6) substituted (with effect in accordance with Sch. 18 para. 23 of the amending Act) by Finance Act 2013 (c. 29), Sch. 18 paras. 18(4)(a), 22; S.I. 2013/1817, art. 2(2); S.I. 2014/1962, art. 2(3)

F55 Words in s. 357CG(6) inserted (with effect in accordance with Sch. 18 para. 23 of the amending Act) by Finance Act 2013 (c. 29), Sch. 18 paras. 18(4)(b), 22; S.I. 2013/1817, art. 2(2); S.I. 2014/1962, art. 2(3)

F56 Word in s. 357CG(6) omitted (with effect in accordance with Sch. 4 para. 17 of the amending Act) by virtue of Finance Act 2014 (c. 26), Sch. 4 paras. 15(3)(a), 16; S.I. 2014/2228, art. 2

F57 Words in s. 357CG(6) inserted (with effect in accordance with Sch. 4 para. 17 of the amending Act) by Finance Act 2014 (c. 26), Sch. 4 paras. 15(3)(a), 16; S.I. 2014/2228, art. 2

F58 Words in s. 357CG(6) substituted (15.9.2016) by Finance Act 2016 (c. 24), Sch. 9 para. 7(4)

F59 Word in s. 357CG(6) omitted (with effect in accordance with Sch. 18 para. 23 of the amending Act) by virtue of Finance Act 2013 (c. 29), Sch. 18 paras. 18(4)(c), 22; S.I. 2013/1817, art. 2(2); S.I. 2014/1962, art. 2(3)

F60 Words in s. 357CG(6) inserted (with effect in accordance with Sch. 18 para. 23 of the amending Act) by Finance Act 2013 (c. 29), Sch. 18 paras. 18(4)(d), 22; S.I. 2013/1817, art. 2(2); S.I. 2014/1962, art. 2(3)

F61 Word in s. 357CG(6) omitted (with effect in accordance with Sch. 4 para. 17 of the amending Act) by virtue of Finance Act 2014 (c. 26), Sch. 4 paras. 15(3)(b), 16; S.I. 2014/2228, art. 2

F62 Words in s. 357CG(6) inserted (with effect in accordance with Sch. 4 para. 17 of the amending Act) by Finance Act 2014 (c. 26), Sch. 4 paras. 15(3)(b), 16; S.I. 2014/2228, art. 2

357CH Shortfall in R&D expenditure U.K.

(1) There is a shortfall in R&D expenditure in relation to a trade of a company for a relevant accounting period if the actual R&D expenditure of the trade for the accounting period (as adjusted under subsections (8) to (11)) is less than 75% of the average amount of R&D expenditure.

(2) The amount that is to be added to the actual R&D expenditure for the purposes of section 357CG(5) is an amount equal to the difference between—

(a) 75% of the average amount of R&D expenditure, and

(b) the actual R&D expenditure, as adjusted under subsections (8) to (11).

(3) In this section—

(a) the “actual R&D expenditure” of a trade of a company for an accounting period is the amount of R&D expenditure that (ignoring section 357CG(5)) is brought into account in calculating the profits of the trade for the accounting period, and

(b) “R&D expenditure” and “relevant accounting period” have the meaning given by section 357CG(6).

(4) The average amount of R&D expenditure is—

where—

E is the amount of R&D expenditure that—

(a)

has been incurred by the company during the relevant period, and

(b)

has been brought into account in calculating the profits of the trade for any accounting period ending before the first relevant accounting period, and

N is the number of days in the relevant period.

(5) The relevant period is the shorter of—

(a) the period of 4 years ending immediately before the first relevant accounting period, and

(b) the period beginning with the day on which the company begins to carry on the trade and ending immediately before the first relevant accounting period.

(6) For a relevant accounting period of less than 12 months, the average amount of R&D expenditure is proportionately reduced.

(7) Subsections (8) to (11) apply for the purposes of determining—

(a) whether there is a shortfall in R&D expenditure for a relevant accounting period, and

(b) if there is such a shortfall, the amount to be added by virtue of subsection (2).

(8) If the amount of the actual R&D expenditure for a relevant accounting period is greater than the average amount of R&D expenditure, the difference between the two amounts is to be added to the actual R&D expenditure for the next relevant accounting period.

(9) If—

(a) there is not a shortfall in R&D expenditure for a relevant accounting period, but

(b) in the absence of any additional amount, there would be a shortfall in R&D expenditure for that accounting period,

the remaining portion of the additional amount is to be added to the actual R&D expenditure for the next relevant accounting period.

(10) For the purposes of this section—

• “additional amount”, in relation to a relevant accounting period, means any amount added to the actual R&D expenditure for that accounting period by virtue of subsection (8), (9) or (11), and

• “the remaining portion” of an additional amount is so much of that amount as exceeds the difference between—

  (a)

  the actual R&D expenditure for the relevant accounting period in the absence of the additional amount, and

  (b)

  75% of the average amount of R&D expenditure.

(11) If—

(a) there is not a shortfall in R&D expenditure for a relevant accounting period, and

(b) there would not be a shortfall in R&D expenditure for that accounting period in the absence of any additional amount,

the additional amount is to be added to the actual R&D expenditure for the next relevant accounting period (in addition to any additional amount so added by virtue of subsection (8)).

[F63 357CHA Shortfall in qualifying expenditure U.K.

(1) There is a shortfall in qualifying expenditure in relation to the separate programme trade of a television production company or (as the case may be) the separate video game trade of a video games development company for a relevant accounting period if the actual qualifying expenditure of the trade for the accounting period (as adjusted under subsections (8) to (11)) is less than 75% of the average amount of qualifying expenditure.

(2) The amount that is to be added to the actual qualifying expenditure for the purposes of section 357CG(5A) is an amount equal to the difference between—

(a) 75% of the average amount of qualifying expenditure, and

(b) the actual qualifying expenditure, as adjusted under subsections (8) to (11).

(3) In this section—

(a) the “actual qualifying expenditure” of a trade of a company for an accounting period is the amount of qualifying expenditure that (ignoring section 357CG(5A)) is brought into account in calculating the profits of the trade for the accounting period, and

(b) the following terms have the meaning given by section 357CG(6)—

• “qualifying expenditure”,

• “relevant accounting period”,

• “the separate programme trade”,

• “the separate video game trade”,

• “television production company”,

• “video games development company”.

(4) The average amount of qualifying expenditure is—

where—

E is the amount of qualifying expenditure that—

(a)

has been incurred by the company during the relevant period, and

(b)

has been brought into account in calculating the profits of the trade for any accounting period ending before the first relevant accounting period, and

N is the number of days in the relevant period.

(5) The relevant period is the shorter of—

(a) the period of 4 years ending immediately before the first relevant accounting period, and

(b) the period beginning with the day on which the company begins to carry on the trade and ending immediately before the first relevant accounting period.

(6) For a relevant accounting period of less than 12 months, the average amount of qualifying expenditure is proportionately reduced.

(7) Subsections (8) to (11) apply for the purposes of determining—

(a) whether there is a shortfall in qualifying expenditure for a relevant accounting period, and

(b) if there is such a shortfall, the amount to be added by virtue of subsection (2).

(8) If the amount of the actual qualifying expenditure for a relevant accounting period is greater than the average amount of qualifying expenditure, the difference between the two amounts is to be added to the actual qualifying expenditure for the next relevant accounting period.

(9) If—

(a) there is not a shortfall in qualifying expenditure for a relevant accounting period, but

(b) in the absence of any additional amount, there would be a shortfall in qualifying expenditure for that accounting period,

the remaining portion of the additional amount is to be added to the actual qualifying expenditure for the next relevant accounting period.

(10) For the purposes of this section—

• “additional amount”, in relation to a relevant accounting period, means any amount added to the actual qualifying expenditure for that accounting period by virtue of subsection (8), (9) or (11), and

• “the remaining portion” of an additional amount is so much of that amount as exceeds the difference between—

  (a)

  the actual qualifying expenditure for the relevant accounting period in the absence of the additional amount, and

  (b)

  75% of the average amount of qualifying expenditure.

(11) If—

(a) there is not a shortfall in qualifying expenditure for a relevant accounting period, and

(b) there would not be a shortfall in qualifying expenditure for that accounting period in the absence of any additional amount,

the additional amount is to be added to the actual qualifying expenditure for the next relevant accounting period (in addition to any additional amount so added by virtue of subsection (8)).]

Textual Amendments

F63 S. 357CHA inserted (with effect in accordance with Sch. 18 para. 23 of the amending Act) by Finance Act 2013 (c. 29), Sch. 18 paras. 19, 22; S.I. 2013/1817, art. 2(2); S.I. 2014/1962, art. 2(3)

Routine return figure U.K.

357CI Routine return figure U.K.

(1) To determine the routine return figure in relation to a trade of a company for an accounting period—

• Step 1 Take the aggregate of any routine deductions made by the company in calculating the profits of the trade for the accounting period. For the meaning of “routine deductions”, see [F64 sections 357BJA and 357BJB] .

• Step 2 Multiply that amount by 0.1.

• Step 3 Calculate X% of the amount given by Step 2.“X%” is the percentage given by Step 2 in section 357C(1).

(2) In a case where—

(a) the company (“C”) is a member of a group,

(b) another member of the group incurs expenses on behalf of C,

(c) had they been incurred by C, C would have made a deduction in respect of the expenses in calculating the profits of the trade for the accounting period, and

(d) the deduction would have been a routine deduction,

C is to be treated for the purposes of subsection (1) as having made such a routine deduction.

(3) Where expenses are incurred by any member of the group on behalf of C and any other member of the group, subsection (2) applies in relation to so much of the amount of the expenses as on a just and reasonable apportionment may properly be regarded as incurred on behalf of C.

Textual Amendments

F64 Words in s. 357CI(1) substituted (15.9.2016) by Finance Act 2016 (c. 24), Sch. 9 para. 8

F65 357CJ Routine deductions U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F65 S. 357CK omitted (15.9.2016) by virtue of Finance Act 2016 (c. 24), Sch. 9 para. 9

F65 357CK Deductions that are not routine deductions U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F65 S. 357CK omitted (15.9.2016) by virtue of Finance Act 2016 (c. 24), Sch. 9 para. 9

Election for small claims treatment U.K.

357CL Companies eligible to elect for small claims treatment U.K.

(1) A company may [F66 make an election under this section] for small claims treatment for an accounting period if condition A or B is met in relation to the accounting period.

(2) Condition A is that the aggregate of the amounts of qualifying residual profit of each trade of the company for the accounting period does not exceed £1,000,000.

(3) Condition B is that—

(a) the aggregate of the amounts of qualifying residual profit of each trade of the company for the accounting period does not exceed the relevant maximum, and

(b) the company did not take Step 6 in section 357C(1) or 357DA(1) for the purpose of calculating the relevant IP profits of any trade of the company for any previous accounting period beginning within the relevant 4-year period.

(4) In subsection (3)(b) “the relevant 4-year period” means the period of 4 years ending immediately before the accounting period mentioned in subsection (3)(a).

(5) If [F67 no other company is a related 51% group company of the company] in the accounting period, the relevant maximum is £3,000,000.

(6) If [F68 one or more other companies are related 51% group companies of the company,] in the accounting period, the relevant maximum is—

where N is the number of [F69 those related 51% group] companies in relation to which an election under [F70 section 357A(1)] has effect for the accounting period.

(7) For an accounting period of less than 12 months, the relevant maximum is proportionately reduced.

(8) Any amount of qualifying residual profit of a trade of the company that is not greater than nil is to be disregarded for the purposes of this section.

F71 (9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F66 Words in s. 357CL(1) substituted (15.9.2016) by Finance Act 2016 (c. 24), Sch. 9 para. 10(2)

F67 Words in s. 357CL(5) substituted (with effect in accordance with Sch. 1 para. 21 of the amending Act) by Finance Act 2014 (c. 26), Sch. 1 para. 13(2)(a)

F68 Words in s. 357CL(6) substituted (with effect in accordance with Sch. 1 para. 21 of the amending Act) by Finance Act 2014 (c. 26), Sch. 1 para. 13(2)(b)(i)

F69 Words in s. 357CL(6) substituted (with effect in accordance with Sch. 1 para. 21 of the amending Act) by Finance Act 2014 (c. 26), Sch. 1 para. 13(2)(b)(ii)

F70 Words in s. 357CL(6) substituted (15.9.2016) by Finance Act 2016 (c. 24), Sch. 9 para. 10(3)

F71 S. 357CL(9) omitted (with effect in accordance with Sch. 1 para. 21 of the amending Act) by virtue of Finance Act 2014 (c. 26), Sch. 1 para. 13(2)(c)

357CM Small claims amount U.K.

(1) This section applies where a company [F72 makes an election under section 357CL] for small claims treatment for an accounting period.

(2) The small claims amount in relation to each trade of the company for the accounting period is—

(a) if the amount in subsection (3) is lower than the small claims threshold, 75% of the qualifying residual profit of the trade for the accounting period;

(b) in any other case, the amount given by—

where—

SCT is the small claims threshold, and

T is the number of trades of the company.

(3) The amount referred to in subsection (2)(a) is—

where QRP is the aggregate of the amounts of qualifying residual profit of each trade of the company for the accounting period (but see subsection (4)).

(4) Any amount of qualifying residual profit of a trade of the company that is not greater than nil is to be disregarded for the purposes of subsection (3).

(5) If [F73 no other company is a related 51% group company of the company] in the accounting period, the small claims threshold is £1,000,000.

(6) If [F74 one or more other companies are related 51% group companies of the company, ] in the accounting period, the small claims threshold is—

where N is the number of [F75 those related 51% group] companies in relation to which an election under section 357A has effect for the accounting period.

(7) For an accounting period of less than 12 months, the small claims threshold is proportionately reduced.

F76 (8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F72 Words in s. 357CM(1) substituted (15.9.2016) by Finance Act 2016 (c. 24), Sch. 9 para. 11

F73 Words in s. 357CM(5) substituted (with effect in accordance with Sch. 1 para. 21 of the amending Act) by Finance Act 2014 (c. 26), Sch. 1 para. 13(3)(a)

F74 Words in s. 357CM(6) substituted (with effect in accordance with Sch. 1 para. 21 of the amending Act) by Finance Act 2014 (c. 26), Sch. 1 para. 13(3)(b)(i)

F75 Words in s. 357CM(6) substituted (with effect in accordance with Sch. 1 para. 21 of the amending Act) by Finance Act 2014 (c. 26), Sch. 1 para. 13(3)(b)(ii)

F76 S. 357CM(8) omitted (with effect in accordance with Sch. 1 para. 21 of the amending Act) by virtue of Finance Act 2014 (c. 26), Sch. 1 para. 13(3)(c)

Marketing assets return figure U.K.

357CN Marketing assets return figure U.K.

(1) The marketing assets return figure in relation to a trade of a company for an accounting period is—

where—

NMR is the notional marketing royalty in respect of the trade for the accounting period (see section 357CO), and

AMR is the actual marketing royalty in respect of the trade for the accounting period (see section 357CP).

(2) Where—

(a) AMR is greater than NMR, or

(b) the difference between NMR and AMR is less than 10% of the qualifying residual profit of the trade for the accounting period,

the marketing assets return figure is nil.

357CO Notional marketing royalty U.K.

(1) The notional marketing royalty in respect of a trade of a company for an accounting period is the appropriate percentage of the relevant IP income for that accounting period.

In this section “relevant IP income”, in relation to a trade of a company for an accounting period, means so much of the total gross income of the trade for the accounting period as is relevant IP income.

(2) The “appropriate percentage” is the proportion of any relevant IP income for an accounting period which the company would pay another person (“P”) for the right to exploit the relevant marketing assets in that accounting period if the company were not otherwise able to exploit them.

(3) For the purposes of this section a marketing asset is a “relevant marketing asset” in relation to an accounting period if the relevant IP income of the trade of the company for the accounting period includes any income arising from things done by the company that involve the exploitation by the company of that marketing asset.

(4) For the purposes of determining the appropriate percentage under this section, assume that—

(a) the company and P are dealing at arm's length,

(b) the company, or the company and persons authorised by it, will have the right to exploit the relevant marketing assets to the exclusion of any other person (including P),

(c) the company will have the same rights in relation to the relevant marketing assets as it actually has,

(d) the right to exploit the relevant marketing assets is conferred on the relevant day,

(e) the appropriate percentage for the accounting period is determined at the beginning of the accounting period,

(f) the appropriate percentage for the accounting period will apply for each succeeding accounting period for which the company will have the right to exploit the relevant marketing assets, and

(g) no income other than relevant IP income will arise from anything done by the company that involves the exploitation by the company of the relevant marketing assets.

(5) In subsection (4)(d) “the relevant day”, in relation to a relevant marketing asset, means—

(a) the first day of the accounting period, or

(b) if later, the day on which the company first acquired the relevant marketing asset or the right to exploit the asset.

(6) In determining the appropriate percentage, the company must act in accordance with—

(a) Article 9 of the OECD Model Tax Convention, and

(b) the OECD transfer pricing guidelines.

(7) In this section “marketing asset” means any of the following (whether or not capable of being transferred or assigned)—

(a) anything in respect of which proceedings for passing off could be brought, including a registered trade mark (within the meaning of the Trade Marks Act 1994),

(b) anything that corresponds to a marketing asset within paragraph (a) and is recognised under the law of a country or territory outside the United Kingdom,

(c) any signs or indications (so far as not falling within paragraph (a) or (b)) which may serve, in trade, to designate the geographical origin of goods or services, and

(d) any information which relates to customers or potential customers of the company, or any other member of a group of which the company is a member, and is intended to be used for marketing purposes.

357CP Actual marketing royalty U.K.

(1) The actual marketing royalty in respect of a trade of a company for an accounting period is X% of the aggregate of any sums which—

(a) were paid by the company for the purposes of acquiring any relevant marketing assets, or the right to exploit any such assets, and

(b) were brought into account as debits in calculating the profits of the trade for the accounting period.

(2) In this section—

• “relevant marketing assets” has the same meaning as in section 357CO, and

• “X%” is the percentage given by Step 2 in section 357C(1).

Profits arising before grant of right U.K.

357CQ Profits arising before grant of right U.K.

(1) This section applies where a company—

(a) holds a right mentioned in paragraph (a), (b) or (c) of section 357BB(1) (rights to which this Part applies) or an exclusive licence in respect of such a right, or

(b) would hold such a right or licence but for the fact that the company disposed of any rights in the invention or (as the case may be) the licence before the right was granted.

(2) The company may elect that, for the purposes of determining the relevant IP profits of a trade of the company for the accounting period in which the right is granted, there is to be added the amount determined in accordance with subsection (3) (the “ additional amount ”).

(3) The additional amount is the difference between—

(a) the aggregate of the relevant IP profits of the trade for each relevant accounting period, and

(b) the aggregate of what the relevant IP profits of the trade for each relevant accounting period would have been if the right had been granted on the relevant day.

(4) For the purposes of determining the additional amount, the amount of any relevant IP profits to which section 357A does not apply by virtue of Chapter 5 (relevant IP losses) is to be disregarded.

(5) In this section “relevant accounting period” means—

(a) the accounting period of the company in which the right is granted, and

(b) any earlier accounting period of the company which meets the conditions in subsection (6).

(6) The conditions mentioned in subsection (5)(b) are—

(a) that it is an accounting period for which an election made by the company under section 357A has effect,

(b) that it is an accounting period for which the company is a qualifying company, and

(c) that it ends on or after the relevant day.

(7) In this section “the relevant day” is the later of—

(a) the first day of the period of 6 years ending with the day on which the right is granted, or

(b) the day on which—

(i) the application for the grant of the right was filed, or

(ii) in the case of a company that holds an exclusive licence in respect of the right, the licence was granted.

(8) Where the company would be a qualifying company for an accounting period but for the fact that the right had not been granted at any time during that accounting period, the company is to be treated for the purposes of this section as if it were a qualifying company for that accounting period.

(9) Where the company would be a qualifying company for the accounting period in which the right was granted but for the fact that the company disposed of the rights or licence mentioned in subsection (1)(b) before the right was granted, the company is to be treated for the purposes of section 357A as if it were a qualifying company for that accounting period.

CHAPTER 4 U.K. Streaming

357D Alternative method of calculating relevant IP profits: “streaming” U.K.

(1) A company may elect to apply section 357DA (instead of section 357C) for the purposes of determining the relevant IP profits of any trade of the company for an accounting period [F77 in a case where—

( a) the accounting period began before 1 July 2021,

(b) the company is not a new entrant (see section 357A(11)), and

(c) none of the amounts of relevant IP income brought into account as credits in calculating the profits of the trade for the accounting period is properly attributable to a new qualifying IP right (see section 357BP).]

(2) An election made under subsection (1) is known as a “streaming election”.

(3) A streaming election has effect—

(a) for the accounting period for which it is made, and

(b) for each subsequent accounting period.

This is subject to section 357DB.

[F78 (4) A company must apply section 357DA (instead of section 357C) for the purposes of determining the relevant IP profits of a trade of the company for an accounting period in a case mentioned in subsection (1) if any of the mandatory streaming conditions in section 357DC is met in relation to the trade for the period.]

Textual Amendments

F77 Words in s. 357D(1) inserted (15.9.2016) by Finance Act 2016 (c. 24), Sch. 9 para. 12(2)

F78 S. 357D(4) substituted (15.9.2016) by Finance Act 2016 (c. 24), Sch. 9 para. 12(3)

357DA Relevant IP profits U.K.

(1) To determine the relevant IP profits of a trade of a company for an accounting period in accordance with this section—

• Step 1 Take any amounts which are brought into account as credits in calculating the profits of the trade for the accounting period, other than any amounts of finance income (see [F79 section 357BG]), and divide them into two “streams”, amounts of relevant IP income (see [F80 sections 357BH to 357BHC]) and amounts that are not amounts of relevant IP income. The stream consisting of relevant IP income is “the relevant IP income stream”.

• Step 2 Take any amounts which are brought into account as debits in calculating the profits of the trade for the accounting period, other than any amounts referred to in section 357CG(3), and allocate them on a just and reasonable basis between the two streams. (See also section 357CG(5).)

• Step 3 Deduct from the relevant IP income stream the amounts allocated to that stream under Step 2.

• Step 4 Deduct from the amount given by Step 3 the routine return figure [F81 in relation to the trade for the accounting period] (see subsection (4)). The amount given by this step is the “qualifying residual profit”.

  If the amount of the qualifying residual profit is not greater than nil, go to Step 7.

• Step 5 If the company has [F82 made an election under section 357CL] for small claims treatment, calculate the small claims amount in relation to the trade (see section 357CM). If the company has not, go to Step 6.

• Step 6 Deduct from the qualifying residual profit the marketing assets return figure [F83 in relation to the trade for the accounting period] (see section 357CN and subsection (6)).

• Step 7 If the company has made an election under section 357CQ (which provides in certain circumstances for profits arising before the grant of a right to be treated as relevant IP profits), add to the amount given by Step 5 or 6 (or, if the amount of the qualifying residual profit was not greater than nil, Step 4) any amount determined in accordance with subsection (3) of that section.

(2) If the amount given by subsection (1) is greater than nil, that amount is the relevant IP profits of the trade for the accounting period.

(3) If the amount given by subsection (1) is less than nil, that amount is the relevant IP losses of the trade for the accounting period (see Chapter 5).

(4) The routine return figure, in relation to a trade of a company for an accounting period, is 10% of the aggregate of any routine deductions which—

(a) have been made by the company in calculating the profits of the trade for the accounting period, and

(b) have been allocated to the relevant IP income stream under Step 2.

In this subsection “routine deductions” is to be read in accordance with [F84 sections 357BJA and 357BJB].

(5) Subsections (2) and (3) of section 357CI have effect for the purposes of subsection (4) of this section as they have effect for the purposes of that section.

(6) For the purposes of determining the marketing assets return figure in Step 6, section 357CP (actual marketing royalty) has effect as if the reference to X% of the aggregate of any sums falling within subsection (1) of that section were a reference to the aggregate of any such sums which have been allocated to the relevant IP income stream under Step 2.

Textual Amendments

F79 Words in s. 357DA(1) substituted (15.9.2016) by Finance Act 2016 (c. 24), Sch. 9 para. 13(2)(a)(i)

F80 Words in s. 357DA(1) substituted (15.9.2016) by Finance Act 2016 (c. 24), Sch. 9 para. 13(2)(a)(ii)

F81 Words in s. 357DA(1) inserted (15.9.2016) by Finance Act 2016 (c. 24), Sch. 9 para. 13(2)(b)

F82 Words in s. 357DA(1) substituted (15.9.2016) by Finance Act 2016 (c. 24), Sch. 9 para. 13(2)(c)

F83 Words in s. 357DA(1) inserted (15.9.2016) by Finance Act 2016 (c. 24), Sch. 9 para. 13(2)(d)

F84 Words in s. 357DA(4) substituted (15.9.2016) by Finance Act 2016 (c. 24), Sch. 9 para. 13(3)

357DB Method of allocation U.K.

(1) In this section “method of allocation” means the method of allocating, for the purposes of Step 2 in section 357DA(1), the amounts mentioned in that step.

(2) A company that applies section 357DA for the purposes of determining the relevant IP profits of a trade of the company for an accounting period must use the same method of allocation in relation to the trade for that accounting period as it used in the last accounting period of the company for which it applied that section for the purposes of determining the relevant IP profits of the trade.

(3) But subsection (2) does not apply if there is a change of circumstances relating to the trade which makes the use of that method of allocation in relation to the trade for the accounting period inappropriate.

(4) In such a case, the company may—

(a) use a different method of allocation in relation to the trade for the accounting period (and subsection (2) applies accordingly for subsequent accounting periods), or

(b) elect not to apply section 357DA for the purposes of determining the relevant IP profits of the trade for the accounting period.

(5) Subsection (4)(b) does not prevent the company making a fresh streaming election in relation to the trade for any subsequent accounting period.

357DC The mandatory streaming conditions U.K.

(1) Mandatory streaming condition A is met in relation to a trade of a company for an accounting period if—

(a) any amount brought into account as a credit in calculating the profits of the trade for the accounting period is not fully recognised as revenue for the accounting period, and

(b) the amount, or the aggregate of any such amounts, is substantial.

(2) An amount is a “substantial” amount for the purposes of this section if it is greater than—

(a) £2,000,000, or

(b) 20% of the total gross income of the trade for the accounting period,

whichever is the lower.

(3) But an amount is not a substantial amount for the purposes of this section if it does not exceed £50,000.

(4) The reference in subsection (1)(a) to an amount brought into account as a credit includes a reference to any amount brought into account by virtue of section 147 of TIOPA 2010 (basic transfer-pricing rule).

(5) Mandatory streaming condition B is met in relation to a trade of a company for an accounting period if the total gross income of the trade for the accounting period includes—

(a) relevant IP income, and

(b) a substantial amount of licensing income that is not relevant IP income.

(6) In subsection (5) “licensing income” means income consisting of any licence fee, royalty or other payment which the company has received under an agreement granting another person any right in respect of any intellectual property held by the company.

“Intellectual property” has the meaning given by section 712(3) of CTA 2009.

(7) Mandatory streaming condition C is met in relation to a trade of a company for an accounting period if the total gross income of the trade for the accounting period includes—

(a) income that is not relevant IP income, and

(b) a substantial amount of relevant Head 2 income.

(8) Income is “relevant Head 2 income” for the purposes of subsection (7) if—

(a) it is relevant IP income received under an agreement falling within subsection (6) of [F85 section 357BH] , and

(b) every qualifying IP right—

(i) in respect of which a right within paragraph (a) of that subsection is granted by the agreement, or

(ii) which is granted in respect of an invention in respect of which a right within paragraph (b) of that subsection is granted by the agreement,

is a right in respect of which the company holds an exclusive licence.

(9) In a case where—

(a) relevant IP income is received under an agreement falling within [F86 section 357BH(6)] , but

(b) the condition in paragraph (b) of subsection (8) above is not met,

so much of the relevant IP income as on a just and reasonable apportionment is attributable to any qualifying IP right falling within that paragraph is relevant Head 2 income for the purposes of subsection (7).

Textual Amendments

F85 Words in s. 357DC(8)(a) substituted (15.9.2016) by Finance Act 2016 (c. 24), Sch. 9 para. 14(2)

F86 Words in s. 357DC(9)(a) substituted (15.9.2016) by Finance Act 2016 (c. 24), Sch. 9 para. 14(3)

CHAPTER 5 U.K. Relevant IP losses

357E Company with relevant IP losses: set-off amount U.K.

Where a company would be entitled to make a deduction under section 357A(2) in calculating the profits of a trade of the company for an accounting period but for the fact that there are relevant IP losses of the trade for the accounting period, there is a “set-off amount” in relation to the trade of the company for the accounting period which is equal to the amount of the relevant IP losses.

357EA Effect of set-off amount on company with more than one trade U.K.

(1) This section applies where—

(a) there is a set-off amount in relation to a trade of a company for an accounting period, and

(b) the company carries on any other trade.

(2) The set-off amount is to be reduced (but not to below nil) by any relevant IP profits of that other trade for the accounting period.

(3) Section 357A does not apply in relation to so much of the amount of relevant IP profits of that other trade for the accounting period as is equal to the amount by which the set-off amount is reduced under subsection (2).

357EB Allocation of set-off amount within a group U.K.

(1) This section applies where—

(a) there is a set-off amount in relation to a trade of a company for an accounting period,

(b) the company is a member of a group, and

(c) the set-off amount has not been reduced to nil by the operation of section 357EA(2).

(2) The set-off amount (or so much of it as remains after the operation of section 357EA(2)) is to be reduced (but not to below nil) by any relevant IP profits of a trade of a relevant group member for the relevant accounting period.

(3) For the purposes of this section—

(a) “relevant group member” means another member of the group that has made an election under [F87 section 357A(1)] and is a qualifying company for the relevant accounting period, and

(b) “relevant accounting period”, in relation to a company, means the accounting period of the company in or at the end of which the accounting period mentioned in subsection (1)(a) ends.

(4) Section 357A does not apply in relation to so much of the amount of relevant IP profits of the trade of the relevant group member for the relevant accounting period as is equal to the amount by which the set-off amount (or so much of it as remains after the operation of section 357EA(2)) is reduced under subsection (2).

(5) Where there is more than one relevant group member, the relevant group members may jointly determine the order in which subsection (2) is to apply to them.

(6) If no determination is made under subsection (5), subsection (2) is to apply first to the trade that has the greatest amount of relevant IP profits of any trade of any of the relevant group members for a relevant accounting period, then to the trade that has the second greatest amount of relevant IP profits of any of those trades for such a period, and so on.

Textual Amendments

F87 Words in s. 357EB(3)(a) substituted (15.9.2016) by Finance Act 2016 (c. 24), Sch. 9 para. 15

357EC Carry-forward of set-off amount U.K.

(1) This section applies where—

(a) there is a set-off amount in relation to a trade of a company for an accounting period, and

(b) the set-off amount has not been reduced to nil by the operation of section 357EA(2) or 357EB(2).

(2) The set-off amount (or so much of it as remains after the operation of section 357EA(2) or 357EB(2)) is to be reduced (but not to below nil) by the amount of any relevant IP profits of the trade of the company for the current accounting period.

The “current accounting period” is the accounting period immediately following the accounting period mentioned in subsection (1)(a).

(3) Section 357A does not apply in relation to so much of the amount of relevant IP profits of the trade of the company for the current accounting period as is equal to the amount by which the set-off amount (or so much of it as remains after the operation of section 357EA(2) or 357EB(2)) is reduced under subsection (2).

(4) If any portion of the set-off amount remains after the operation of subsection (2), that portion (“the remaining portion”) is to be treated as the set-off amount in relation to the trade of the company for the current accounting period (and the provisions of this Chapter apply accordingly).

(5) If there are relevant IP losses of the trade of the company for the current accounting period, the set-off amount in relation to the trade of the company for that accounting period is the aggregate of the remaining portion and an amount equal to the amount of those relevant IP losses (and the provisions of this Chapter apply accordingly).

357ED Company ceasing to carry on trade, etc U.K.

(1) This section applies where—

(a) there is a set-off amount in relation to a trade of a company for an accounting period, and

(b) at any time in the accounting period immediately following that accounting period, the company meets any of the conditions in subsection (2).

(2) The conditions are—

(a) that the company ceases to carry on the trade,

(b) that the company ceases to be within the charge to corporation tax in respect of the trade, or

(c) that any election made by the company under [F88 section 357A(1)] ceases to have effect.

(3) Sections 357EA to 357EC continue to have effect in relation to the set-off amount subject to the following provisions of this section.

(4) Section 357EB has effect as if—

(a) the reference in subsection (1)(b) to the company being a member of a group were a reference to the company having been a member of the group at the time referred to in subsection (1)(b) of this section,

(b) for subsection (2) there were substituted—

“(2) The set-off amount (or so much of it as remains after the operation of section 357EA(2)) is to become, or be added to, the set-off amount in relation to a trade of a relevant group member for the relevant accounting period.”,

(c) subsection (4) were omitted,

(d) for the words after “determine” in subsection (5) there were substituted “ the relevant group member to which subsection (2) is to apply ”, and

(e) for subsection (6) there were substituted—

“(6) If no determination is made under subsection (5), subsection (2) is to apply to the trade that has the greatest amount of relevant IP profits of any trade of any of the relevant group members for a relevant accounting period.

(7) If there is no relevant group member with any relevant IP profits of a trade for the relevant accounting period, subsection (2) is to apply to the trade that has the greatest set-off amount in relation to any trade of any of the relevant group members for a relevant accounting period.”

(5) Sections 357EA to 357EC cease to have effect in relation to the set-off amount in relation to the trade of the company for an accounting period if—

(a) the company is not carrying on any other trade in that accounting period, and

(b) in the case of a company that was a member of a group at the time referred to in subsection (1)(b) of this section, none of the members of the group is a relevant group member (within the meaning of section 357EB).

(6) In such a case, the set-off amount (so far as remaining after the operation of those sections) is to be reduced to nil.

Textual Amendments

F88 Words in s. 357ED(2)(c) substituted (15.9.2016) by Finance Act 2016 (c. 24), Sch. 9 para. 16

357EE Transfer of a trade between group members U.K.

(1) This section applies where—

(a) there is a set-off amount in relation to a trade of a company for an accounting period,

(b) the company is a member of a group,

(c) the company ceases to carry on the trade, and

(d) another company (“the transferee”) that is a member of the group begins to carry on that trade.

(2) For the purposes of this Chapter an amount equal to the set-off amount is to become, or be added to, the set-off amount in relation to the trade of the transferee for the accounting period in which the transferee begins to carry on the trade.

357EF Payments between group members in consequence of section 357EB U.K.

(1) This section applies if—

(a) there is a set-off amount in relation to a trade of a company for an accounting period,

(b) subsection (2) of section 357EB has effect in relation to a relevant group member for the relevant accounting period (within the meaning of that section),

(c) the company and the relevant group member have an agreement between them in relation to the relevant IP losses of the company, and

(d) as a result of the agreement the company makes a payment to the relevant group member that does not exceed the reduction in the relevant IP profits of the relevant group member arising under section 357EB(4).

(2) The payment—

(a) is not to be taken into account in determining the profits or losses of either company for corporation tax purposes, and

(b) is not for any purposes of the Corporation Tax Acts to be regarded as a distribution.

(3) In a case where section 357ED applies (company ceasing to carry on trade, etc), the reference in subsection (1)(d) to the reduction in the relevant IP profits of the relevant group member is to be read as a reference to the amount that becomes, or is added to, the set-off amount in relation to a trade of the relevant group member for the relevant accounting period under section 357EB(2).

CHAPTER 6 U.K. Anti-avoidance

Licences conferring exclusive rights U.K.

357F Licences conferring exclusive rights U.K.

A licence that confers any right in respect of a qualifying IP right to the exclusion of all other persons is not to be regarded as an exclusive licence if the main purpose, or one of the main purposes, of conferring the right is to secure that the licence is an exclusive licence for the purposes of this Part.

Incorporation of qualifying items U.K.

357FA Incorporation of qualifying items U.K.

(1) Income arising from the sale of any item that incorporates a qualifying item is not relevant IP income if the main purpose, or one of the main purposes, of incorporating the qualifying item is to secure that income arising from any such sale is relevant IP income.

(2) “Qualifying item” has the same meaning as in section [F89 357BH(2)] .

Textual Amendments

F89 Word in s. 357FA(2) substituted (15.9.2016) by Finance Act 2016 (c. 24), Sch. 9 para. 17

Tax advantage schemes U.K.

357FB Tax advantage schemes U.K.

(1) This section applies where—

(a) a company is entitled to make a deduction under section 357A(2) in calculating the profits of a trade of the company for an accounting period,

(b) the company is or has at any time been a party to a scheme, and

(c) the main purpose, or one of the main purposes, of the company or, where the company is a member of a group, any member of the group in being a party to the scheme is (or was) to obtain the chance of securing a relevant tax advantage.

(2) There is a “relevant tax advantage” for the purposes of this section if—

(a) (apart from this section) there would be an increase in the amount of any deduction made under section 357A(2) in calculating the profits of a trade of the company or (as the case may be) any other member of the group for any accounting period, and

(b) the increase would arise from—

(i) the avoidance of the operation of any provision of this Part,

(ii) artificially inflating the amount of relevant IP income brought into account in calculating those profits (see subsection (3)), F90 ...

(iii) a mismatch between relevant IP income and expenditure (see subsection (4))[F91 , or

(iv) an R&D fraction (see subsection (4A)) being greater than it would be but for the scheme.]

(3) The reference in subsection (2)(b) to artificially inflating the amount of relevant IP income brought into account in calculating the profits mentioned in subsection (2)(a) is a reference to doing any of the following—

(a) bringing into account in calculating those profits an amount of relevant IP income that wholly or substantially corresponds to an increase in the amounts brought into account as debits in calculating those profits;

(b) bringing into account in calculating those profits an additional amount of relevant IP income that wholly or substantially corresponds to a decrease in the amount of income that is not relevant IP income which is brought into account in calculating those profits.

(4) For the purposes of this section there is a mismatch between relevant IP income and expenditure if—

(a) any relevant IP income brought into account in calculating the profits mentioned in subsection (2)(a) is attributable to any qualifying IP right or an exclusive licence in respect of any such right, and

(b) any expenditure incurred in relation to that right is brought into account in calculating the profits of a trade of the company or (as the case may be) any other member of the group for an accounting period for which an election under [F92 section 357A(1)] did not have effect.

[F93 (4A) The reference in subsection (2)(b)(iv) to an R&D fraction is a reference to such a fraction as is mentioned at Step 6 of section 357BF(2).]

(5) The amount of the deduction which may be made by the company for the accounting period mentioned in subsection (1)(a) is the amount that would secure that no relevant tax advantage arises (and may be nil).

(6) In this section “scheme” includes any scheme, arrangements or understanding of any kind whatever, whether or not legally enforceable, involving a single transaction or two or more transactions.

Textual Amendments

F90 Word in s. 357FB(2)(b)(ii) omitted (with effect in accordance with s. 64(7) of the amending Act) by virtue of Finance Act 2016 (c. 24), s. 64(4)(a)(i)

F91 S. 357FB(2)(b)(iv) and word inserted (with effect in accordance with s. 64(7) of the amending Act) by Finance Act 2016 (c. 24), s. 64(4)(a)(ii)

F92 Words in s. 357FB(4)(b) substituted (15.9.2016) by Finance Act 2016 (c. 24), Sch. 9 para. 18

F93 S. 357FB(4A) inserted (with effect in accordance with s. 64(7) of the amending Act) by Finance Act 2016 (c. 24), s. 64(4)(b)

CHAPTER 7 U.K. Supplementary

Elections under section 357A U.K.

357G Making of election under [F94 section 357A(1) or (11)(b)] U.K.

(1) An election made by a company under [F95 section 357A(1) or (11)(b)] is made by giving notice to an officer of Revenue and Customs.

(2) The notice must specify the first accounting period of the company for which the election is to have effect.

(3) The notice must be given on or before the last day on which an amendment of the company's tax return for that accounting period could be made under paragraph 15 of Schedule 18 to FA 1998.

(4) The election has effect in relation to each trade carried on by the company.

(5) Subject to section 357GA, the election has effect for the accounting period specified in the notice and all subsequent accounting periods of the company.

Textual Amendments

F94 Words in s. 357G heading substituted (15.9.2016) by Finance Act 2016 (c. 24), Sch. 9 para. 19(2)

F95 Words in s. 357G(1) substituted (15.9.2016) by Finance Act 2016 (c. 24), Sch. 9 para. 19(3)

357GA Revocation of election made under [F96 section 357A(1)] U.K.

(1) A company may revoke an election made by it under [F97 section 357A(1)] by giving notice to an officer of Revenue and Customs.

(2) The notice must specify the first accounting period of the company for which the revocation is to have effect.

(3) The notice must be given on or before the last day on which an amendment of the company's tax return for that accounting period could be made under paragraph 15 of Schedule 18 to FA 1998.

(4) The revocation has effect in relation to the accounting period specified in the notice and all subsequent accounting periods of the company.

(5) An election made under [F98 section 357A(1)] by a company that has given notice under this section does not have effect in relation to any accounting period of the company that begins before the end of the period of 5 years beginning with the day after the last day of the accounting period specified in the notice.

Textual Amendments

F96 Words in s. 357GA heading substituted (15.9.2016) by Finance Act 2016 (c. 24), Sch. 9 para. 20(2)

F97 Words in s. 357GA(1) substituted (15.9.2016) by Finance Act 2016 (c. 24), Sch. 9 para. 20(3)

F98 Words in s. 357GA(5) substituted (15.9.2016) by Finance Act 2016 (c. 24), Sch. 9 para. 20(4)

Partnerships U.K.

357GB Application of this Part in relation to partnerships U.K.

(1) This section applies if a firm (within the meaning of CTA 2009) carries on a trade and any partner in the firm is a company within the charge to corporation tax.

Such a partner is referred to in this section as a “corporate partner”.

(2) Subject to the following provisions of this section, this Part applies in relation to the firm as it applies in relation to a company.

(3) Any election under this Part—

(a) may be made or revoked not by the firm but instead by any one or more of the corporate partners (whether jointly or otherwise), and

(b) has effect in relation to each corporate partner making or revoking it as if made or revoked by the firm.

(4) Accordingly, any reference in section 357G(3) or 357GA(3) (time limit for making or revoking elections under section 357A) to the company making or revoking the election is to be read as a reference to the corporate partner so doing.

(5) Section 1261 of CTA 2009 (accounting periods of firms) applies for the purposes of this Part as it applies for the purposes of Part 17 of that Act.

(6) Section 357B (meaning of “qualifying company”) has effect as if in subsection (1) the words “in the case of a company that is a member of a group” were omitted.

(7) For the purposes of this Part the firm meets the development condition in relation to a right to which this Part applies if—

(a) the firm has at any time carried out qualifying development in relation to the right, or

(b) there is a relevant corporate partner in the firm who meets the development condition in relation to the right.

(8) A “relevant corporate partner” is a corporate partner who is entitled to a share of at least 40% of the profits or losses of the firm for any accounting period of the firm.

(9) Section 357BD applies for the purposes of subsection (7)(a) of this section as it applies for the purposes of section 357BC.

(10) Section 357BE (active ownership condition) has effect as if the reference in subsection (4) to section 357BC(2) or (3) included a reference to subsection (7)(a) of this section.

(11) Sections [F99 357BK, 357BKA] 357CL and 357CM (election for small claims treatment) have effect as if—

(a) any reference to a company having one or more associated companies were a reference to any corporate partner in relation to which an election under section [F100 357BK or] 357CL has effect having one or more associated companies, and

(b) any reference to a company having no associated company were a reference to each such corporate partner having no associated company.

(12) Subsection (13) applies where a corporate partner is a party to an arrangement at any time during an accounting period of the firm which produces for the corporate partner a return within [F101 section 357BG(1)(c)] .

(13) For the accounting period of the firm the corporate partner's share of a profit or loss of a trade carried on by the firm is determined for corporation tax purposes as if no election under section 357A had effect in relation to the trade.

Textual Amendments

F99 Words in s. 357GB(11) inserted (15.9.2016) by Finance Act 2016 (c. 24), Sch. 9 para. 21(2)(a)

F100 Words in s. 357GB(11)(a) inserted (15.9.2016) by Finance Act 2016 (c. 24), Sch. 9 para. 21(2)(b)

F101 Words in s. 357GB(12) substituted (15.9.2016) by Finance Act 2016 (c. 24), Sch. 9 para. 21(3)

Cost-sharing arrangements U.K.

[F102 357GC Meaning of “cost-sharing arrangement U.K.

(1) This section applies for the purposes of this Part.

(2) A “cost-sharing arrangement” is an arrangement under which—

(a) each of the parties to the arrangement is required to contribute to the cost of, or undertake activities for the purpose of, creating or developing an item or process,

(b) each of those parties—

(i) is entitled to a share of any income attributable to the item or process, or

(ii) has one or more rights in respect of the item or process, and

(c) the amount of any income received by each of those parties is proportionate to its participation in the arrangement as described in paragraph (a).

(3) “Invention”, in relation to a cost-sharing arrangement, means the item or process that is the subject of the arrangement (or any item or process incorporated within it).

Textual Amendments

F102 Ss. 357GC-357GCZF substituted for s. 357GC (with effect in accordance with s. 23(5) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), s. 23(3)

357GCZA Qualifying IP right held by another party to CSA U.K.

(1) This section applies if—

(a) a company is a party to a cost-sharing arrangement,

(b) another party to the arrangement (“P”) holds a qualifying IP right granted in respect of the invention, and

(c) the company does not hold an exclusive licence in respect of the right.

(2) But this section does not apply if the arrangement produces for the company a return within section 357BG(1)(c).

(3) The company is to be treated for the purposes of this Part as if it held the right.

(4) The right is to be treated for the purposes of this Part as a new qualifying IP right in relation to the company if—

(a) the company or P (or both) became a party to the arrangement on or after 1 April 2017, or

(b) the right is a new qualifying IP right in relation to P (or would be if P was a company).

(5) Subsection (4) does not apply if—

(a) the company held an exclusive licence in respect of the right immediately before it became a party to the arrangement, and

(b) that licence was granted to the company before the relevant date.

(6) The right is to be treated for the purposes of this Part as an old qualifying IP right in relation to the company if it is not to be treated as a new qualifying IP right by reason of subsection (4).

(7) Subsections (7) and (8) of section 357BP (meaning of “relevant date”) apply for the purposes of subsection (5) of this section as they apply for the purposes of subsection (6) of that section.

Textual Amendments

F102 Ss. 357GC-357GCZF substituted for s. 357GC (with effect in accordance with s. 23(5) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), s. 23(3)

357GCZB Exclusive licence held by another party to CSA U.K.

(1) This section applies if—

(a) a company is a party to a cost-sharing arrangement,

(b) another party to the arrangement (“P”) holds an exclusive licence in respect of a qualifying IP right granted in respect of the invention, and

(c) the company does not hold the right or another exclusive licence in respect of it.

(2) But this section does not apply if the arrangement produces for the company a return within section 357BG(1)(c).

(3) The company is to be treated for the purposes of this Part as if it held an exclusive licence in respect of the right.

(4) The right is to be treated for the purposes of this Part as a new qualifying IP right in relation to the company if—

(a) the company or P (or both) became a party to the arrangement on or after 1 April 2017, or

(b) the right is a new qualifying IP right in relation to P (or would be if P was a company).

(5) Subsection (4) does not apply if—

(a) the company held the right immediately before it became a party to the arrangement, and

(b) either—

(i) the right had been granted or issued to the company in response to an application filed before 1 July 2016, or

(ii) the right had been assigned to the company before the relevant date.

(6) Subsection (4) also does not apply if—

(a) the company held an exclusive licence in respect of the right immediately before it became a party to the arrangement, and

(b) that licence was granted to the company before the relevant date.

(7) The right is to be treated for the purposes of this Part as an old qualifying IP right in relation to the company if it is not to be treated as a new qualifying IP right by reason of subsection (4).

(8) Subsections (7) and (8) of section 357BP (meaning of “relevant date”) apply for the purposes of subsections (5) and (6) of this section as they apply for the purposes of subsections (5) and (6) of that section.

Textual Amendments

F102 Ss. 357GC-357GCZF substituted for s. 357GC (with effect in accordance with s. 23(5) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), s. 23(3)

357GCZC R&D undertaken or contracted out by another party to CSA U.K.

(1) Subsection (2) applies if—

(a) a company is a party to a cost-sharing arrangement, and

(b) another party to the arrangement (“P”) undertakes research and development for the purpose of creating or developing the invention.

(2) The research and development is to be treated for the purposes of sections 357BLC and 357BLD as having been contracted out by the company to P.

(3) Subsection (4) applies if—

(a) a company is a party to a cost-sharing arrangement,

(b) another party to the arrangement (“P”) contracts out to another person (“A”) research and development for the purpose of creating or developing the invention, and

(c) the company makes a payment under the arrangement in respect of that research and development (whether to P or to A).

(4) For the purposes of sections 357BLC and 357BLD—

(a) the company is to be treated as having contracted out to P research and development which is the same as that contracted out by P to A, and

(b) the payment mentioned in subsection (3)(c) is to be treated as if it were a payment made to P in respect of the research and development the company is treated as having contracted out to P.

(5) In this section “research and development” has the meaning given by section 1138.

Textual Amendments

F102 Ss. 357GC-357GCZF substituted for s. 357GC (with effect in accordance with s. 23(5) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), s. 23(3)

357GCZD Acquisition of qualifying IP rights etc by another party to CSA U.K.

(1) Subsection (2) applies if—

(a) a company is a party to a cost-sharing arrangement,

(b) a person (“A”) assigns to another party to the arrangement (“P”) a qualifying IP right,

(c) the qualifying IP right is a right in respect of the invention, and

(d) the company makes under the arrangement a payment in respect of the assignment (whether to A or to P).

(2) The payment is to be treated for the purposes of section 357BLE as if it were a payment to A in respect of the assignment by A to the company of the right.

(3) Subsection (4) applies if—

(a) a company is a party to a cost-sharing arrangement,

(b) a person (“A”) grants or transfers to another party to the arrangement (“P”) an exclusive licence in respect of qualifying IP right,

(c) the qualifying IP right is a right granted in respect of the invention, and

(d) the company makes a payment under the arrangement in respect of the grant or transfer (whether to A or to P).

(4) The payment is to be treated for the purposes of section 357BLE as if it were a payment to A in respect of the grant or transfer by A to the company of the licence.

Textual Amendments

F102 Ss. 357GC-357GCZF substituted for s. 357GC (with effect in accordance with s. 23(5) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), s. 23(3)

357GCZE Treatment of expenditure in connection with formation of CSA etc U.K.

(1) Where—

(a) a company makes a payment to a person (“P”) in consideration of that person entering into a cost-sharing arrangement with the company, and

(b) P holds a qualifying IP right granted in respect of the invention or holds an exclusive licence in respect of such a right,

a just and reasonable amount of the payment is to be treated for the purposes of section 357BLE as if it was an amount paid in respect of the assignment to the company of the right or (as the case may be) the transfer to the company of the licence.

(2) Where—

(a) a company makes a payment to a party to a cost-sharing arrangement (“P”) in consideration of P agreeing to the company becoming a party to the arrangement (whether in place of P or in addition to P), and

(b) any party to the arrangement holds a qualifying IP right in respect of the invention or holds an exclusive licence in respect of such a right,

a just and reasonable amount of the payment is to be treated for the purposes of section 357BLE as if it was an amount paid in respect of the assignment to the company of the right or (as the case may be) the transfer to the company of the licence.

(3) Where—

(a) a company that is a party to a cost-sharing arrangement makes a payment to another party to the arrangement in consideration of that party agreeing to the company becoming entitled to a greater share of the income attributable to the invention or acquiring additional rights in relation to the invention, and

(b) any party to the arrangement holds a qualifying IP right in respect of the invention or holds an exclusive licence in respect of such a right,

a just and reasonable amount of the payment is to be treated for the purposes of section 357BLE as if it was an amount paid in respect of the assignment to the company of the right or (as the case may be) the transfer to the company of the licence.

Textual Amendments

F102 Ss. 357GC-357GCZF substituted for s. 357GC (with effect in accordance with s. 23(5) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), s. 23(3)

357GCZF Treatment of income in connection with formation of CSA etc U.K.

(1) Where—

(a) a company receives a payment in consideration of its entering into a cost-sharing arrangement, and

(b) the company holds a qualifying IP right granted in respect of the invention or holds an exclusive licence in respect of such a right,

a just and reasonable amount of the payment is to be treated as relevant IP income of the company.

(2) Where—

(a) a company that is a party to a cost-sharing arrangement receives a payment from a person in consideration of its agreeing to that person becoming a party to the arrangement (whether in place of the company or in addition to it), and

(b) any party to the arrangement holds a qualifying IP right in respect of the invention or holds an exclusive licence in respect of such a right,

a just and reasonable amount of the payment is to be treated as relevant IP income of the company.

(3) Where—

(a) a company that is a party to a cost-sharing arrangement receives a payment from another party to the arrangement in consideration of its agreeing to that party becoming entitled to a greater share of the income attributable to the invention or acquiring additional rights in relation to the invention, and

(b) any party to the arrangement holds a qualifying IP right in respect of the invention or holds an exclusive licence in respect of such a right,

a just and reasonable amount of the payment is to be treated as relevant IP income of the company.]

Textual Amendments

F102 Ss. 357GC-357GCZF substituted for s. 357GC (with effect in accordance with s. 23(5) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), s. 23(3)

[F103 Transferred trades U.K.

Textual Amendments

F103 S. 357GCA and cross-heading inserted (with effect in accordance with s. 64(7) of the amending Act) by Finance Act 2016 (c. 24), s. 64(5)

357GCA Application of this Part in relation to transferred trades U.K.

(1) Where—

(a) a company (“the transferor”) ceases to carry on a trade which involves the exploitation of a qualifying IP right (“the relevant qualifying IP right”),

(b) the transferor assigns the relevant qualifying IP right, or grants or transfers an exclusive licence in respect of it, to another company (“the transferee”), and

(c) the transferee begins to carry on the trade,

the following provisions apply in determining under this Part the relevant IP profits of the trade carried on by the transferee.

(2) The transferee is to be treated as not being a new entrant if—

(a) an election under section 357A(1) has effect in relation to the transferor on the date of the assignment, grant or transfer mentioned in subsection (1)(b) (“the transfer date”), and

(b) the first accounting period of the transferor for which that election had effect began before 1 July 2016.

(3) The relevant qualifying IP right is to be treated as being an old qualifying IP right in relation to the transferee if by reason of section 357BP it is an old qualifying IP right in relation to the transferor.

(4) Expenditure incurred prior to the transfer date by the transferor which is attributable to relevant research and development undertaken by the transferor is to be treated for the purposes of section 357BLB as if it is expenditure incurred by the transferee which is attributable to relevant research and development undertaken by the transferee.

(5) Expenditure incurred prior to the transfer date by the transferor in making a payment to a person in respect of relevant research and development contracted out by the transferor to that person is to be treated for the purposes of sections 357BLC and 357BLD as if it is expenditure incurred by the transferee in making a payment to that person in respect of relevant research and development contracted out by the transferee to that person.

(6) Expenditure incurred prior to the transfer date by the transferor in making a payment in connection with the relevant qualifying IP right which is within subsection (2), (3) or (4) of section 357BLE is to be treated for the purposes of that section as if it is expenditure incurred by the transferee in making a payment in connection with that right which is within one of those subsections.

(7) Expenditure incurred by the transferee in making a payment to the transferor in respect of the assignment, grant or transfer mentioned in subsection (1)(b) is to be ignored for the purposes of section 357BLE.

(8) In this section—

• “trade” includes part of a trade, and

• “relevant research and development” means research and development which relates to the relevant qualifying IP right.

(9) For the purposes of this section research and development “relates” to the relevant qualifying IP right if—

(a) it creates, or contributes to the creation of the invention,

(b) it is undertaken for the purpose of developing the invention,

(c) it is undertaken for the purpose of developing ways in which the invention may be used or applied, or

(d) it is undertaken for the purpose of developing any item or process incorporating the invention.]

Interpretation U.K.

357GD Meaning of “group” U.K.

(1) For the purposes of this Part a company (“company A”) is a member of a group at any time if any other company is at that time associated with company A.

(2) The group consists of company A and each company in relation to which the condition in subsection (1) is met.

(3) For the purposes of this section a company (“company B”) is associated with company A at a time (“the relevant time”) if any of the following five conditions is met.

(4) The first condition is that the financial results of company A and company B, for a period that includes the relevant time, meet the consolidation condition.

(5) The second condition is that there is a connection between company A and company B for the accounting period of company A in which the relevant time falls.

(6) The third condition is that, at the relevant time, company A has a major interest in company B or company B has a major interest in company A.

(7) The fourth condition is that—

(a) the financial results of company A and a third company, for a period that includes the relevant time, meet the consolidation condition, and

(b) at the relevant time the third company has a major interest in company B.

(8) The fifth condition is that—

(a) there is a connection between company A and a third company for the accounting period of company A in which the relevant time falls, and

(b) at the relevant time the third company has a major interest in company B.

(9) In this section, the financial results of any two companies for any period meet “the consolidation condition” if—

(a) they are required to be fully comprised in group accounts,

(b) they would be required to be fully comprised in such accounts but for the application of an exemption, or

(c) they are in fact fully comprised in such accounts.

(10) In subsection (9) “group accounts” means accounts prepared under—

(a) section 399 of the Companies Act 2006, or

(b) any corresponding provision of the law of a country or territory outside the United Kingdom.

(11) The following provisions apply for the purposes of this section—

• sections 466 to 471 of CTA 2009 (companies connected for accounting period), and

• sections 473 and 474 of CTA 2009 (meaning of “major interest”).

357GE Other interpretation U.K.

(1) In this Part—

• “invention”, in relation to a right to which this Part applies, means the item or process in respect of which the right is granted,

• “item” includes any substance,

• “the OECD Model Tax Convention” means—

  (a)

  the version of the Model Tax Convention on Income and on Capital published in July 2010 by the Organisation for Economic Co-operation and Development (“the OECD”), or

  (b)

  such other document approved and published by the OECD in place of that (or a later) version or in place of that Convention as is designated for the time being by order made by the Treasury,

• “the OECD transfer pricing guidelines” [F104 has the same meaning as “the transfer pricing guidelines” in section 164 of TIOPA 2010]

• [F105 “ payment ” includes payment in money's worth.]

• F106 ...

[F107 (1A) In Chapters 3 and 4 of this Part “qualifying residual profit” of a trade, in relation to any accounting period, is the amount obtained by the application of Steps 1 to 4 in section 357C or (as the case may be) section 357DA in relation to the trade for the accounting period.]

(2) Any reference in this Part to calculating the profits of a trade of a company for an accounting period is a reference to calculating those profits for corporation tax purposes (and any reference to the profits or losses of a trade of a company for an accounting period is to be read accordingly).]

Textual Amendments

F104 Words in s. 357GE(1) substituted (with effect in accordance with s. 75(4) of the amending Act) by Finance Act 2016 (c. 24), s. 75(2)

F105 Words in s. 357GE(1) inserted (15.9.2016) by Finance Act 2016 (c. 24), Sch. 9 para. 23(2)(a)

F106 Words in s. 357GE(1) omitted (15.9.2016) by virtue of Finance Act 2016 (c. 24), Sch. 9 para. 23(2)(b)

F107 S. 357GE(1A) inserted (15.9.2016) by Finance Act 2016 (c. 24), Sch. 9 para. 23(3)