CFM95800 | Interest restriction: tax-EBITDA: Patent box

TIOPA10/S407(3)(l)

Deductions for profits from patents chargeable to a lower rate of corporation tax under CTA10/S357A are excluded from the calculation of adjusted corporation tax earnings when determining a company’s tax-EBITDA.

Further guidance on the Patent Box regime can be found at CIRD220000.

Effect for tax-EBITDA purposes

The Patent Box Regime is one of the qualifying tax reliefs specified as an as an excluded amount in TIOPA10/S407(3)(l).

If brought into account for tax-EBITDA purposes, the additional Patent Box deduction would have the effect of distorting the core earnings of the company. Effectively, for a company which is subject to an interest restriction, this could reduce the benefit of the Patent Box regime by 30% (or higher if using the Group Ratio Method).

Consequently, an additional deduction received under CTA10/S357A should not be brought into account when calculating taxable total profits of the period to determine a company’s tax-EBITDA.