Section 357A | Election for special treatment of profits from patents etc ^F1

From legislation.gov.uk

(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.^F1

(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.^F1

(3)The amount of the deduction is—^F1F2F3

Formula

RP \times (\frac{MR - IPR}{MR})

where—

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

“AR” means, in relation to a company—

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

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%.^F1

(5)Chapter 2 specifies when a company is a qualifying company.^F1

(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—^F1F4

(a)the accounting period begins on or after 1 July 2021, or^F1F4

(b)the company is a new entrant (see subsection (11)).^F1F4

(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—^F1F4

(a)the accounting period begins before 1 July 2021, and^F1F4

(b)the company is not a new entrant.^F1F4

(8)Chapter 5 makes provision in relation to the relevant IP losses of a trade.^F1

(9)Chapter 6 contains anti-avoidance provisions.^F1

(10)Chapter 7 contains supplementary provision.^F1

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

(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^F5

(b)the company elects to be treated as a new entrant for the purposes of this Part.^F5