Section 357DA | Relevant IP profits ^F1

(1)To determine the relevant IP profits of a trade of a company for an accounting period in accordance with this section—^F1F2F3F4F5F6

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”.

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 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 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 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.^F1

(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).^F1

(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—^F1F7

(a)have been made by the company in calculating the profits of the trade for the accounting period, and^F1

(b)have been allocated to the relevant IP income stream under Step 2.^F1

In this subsection “routine deductions” is to be read in accordance with 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.^F1

(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.^F1