Section 357CO | Notional marketing royalty ^F1

(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.