Section 1112E | Exception for companies creating or managing intellectual property ^F1

(1)There is no cap by reference to a company’s PAYE and NIC liabilities for an accounting period if the company meets conditions A and B.^F1

(2)A company meets condition A for an accounting period if, during the period, the company is engaged in—^F1

(a)taking, or preparing to take, steps in order that relevant intellectual property will be created by it,^F1

(b)creating relevant intellectual property, or^F1

(c)performing a significant amount of management activity in relation to relevant intellectual property it holds.^F1

(3)For the purposes of subsection (2)—^F1

(a)a company is only engaged in an activity mentioned in paragraph (a), (b) or (c) of subsection (2) if the activity is wholly or mainly undertaken by employees of the company;^F1

(b)intellectual property is “relevant” intellectual property in relation to a company if the whole or the greater part (in terms of value) of it is created by the company;^F1

(c)intellectual property is created by a company if it is created in circumstances in which the right to exploit it vests in the company (whether alone or jointly with others).^F1

(4)For the purposes of this section—^F1

“intellectual property” means—

any patent, trade mark, registered design, copyright, design right or plant breeder’s right,

any rights under the law of a country or territory outside the United Kingdom which correspond or are similar to those falling within paragraph (a), or

any information or technique not protected by a right within paragraph (a) or (b) but having industrial, commercial or other economic value;

“management activity”, in relation to intellectual property, means formulating plans and making decisions in relation to the development or exploitation of the intellectual property.

(5)A company meets condition B for an accounting period if the amount (if any) given by subsection (6) does not exceed 15% of the company’s qualifying expenditure for the period.^F1

(6)The amount given by this subsection is the sum of the following incurred by the company in the period—^F1

(a)qualifying expenditure on externally provided workers (see section 1127), where the company, the staff provider and (if different) the staff controller (or staff controllers)—^F1

(i)are all connected, or^F1

(ii)have jointly elected (under section 1130) that section 1129 is to apply to them as if they were all connected;^F1

(b)qualifying contractor expenditure, where the company and the contractor—^F1

(i)are connected, or^F1

(ii)have jointly elected (under section 1135) that section 1134 is to apply to them as if they were connected.^F1

(7)In subsection (6)(b), “qualifying contractor expenditure” has whichever of the meanings given by 1112C(7) corresponds to the purpose for which this section is being applied.^F1

(8)The Treasury may by regulations replace the percentage for the time being specified in subsection (5) with a different percentage.^F1