Section 371DJ | Exclusion: trading profits (IP condition)

(1)This section applies for the purposes of section 371DF(1)(d).

(2)The IP condition is met unless—

(a)the CFC's assumed total profits include amounts arising from intellectual property held by the CFC (“the exploited IP”),

(b)all or parts of the exploited IP were—

(i)transferred (directly or indirectly) to the CFC by persons related to the CFC at times during the relevant period, or

(ii)otherwise derived (directly or indirectly) at times during that period out of or from intellectual property held at times during that period by persons related to the CFC,

(c)as a result of those transfers or other derivations, the value of the intellectual property held by those persons related to the CFC, taken together, has been significantly reduced from what it would otherwise have been, and

(d)if only parts of the exploited IP were so transferred or derived, the significance condition is met.

(3)The significance condition is met if—

(a)the parts of the exploited IP (“the UK derived IP”) which were transferred or otherwise derived as mentioned in subsection (2)(b) are, taken together, a significant part of the exploited IP, or

(b)as a result of the transfers or other derivations of the UK derived IP, the CFC's assumed total profits are significantly higher than what they would otherwise have been.

(4)In relation to a non-UK resident person who is related to the CFC, in this section references to the transfer or holding of intellectual property by a person related to the CFC are limited to, as the case may be—

(a)the transfer of intellectual property which before the transfer was held by the non-UK resident person (wholly or partly) for the purposes of a permanent establishment which the person has in the United Kingdom, or

(b)the holding of intellectual property by the non-UK resident person (wholly or partly) for those purposes.

(5)“The relevant period” means the period covering the accounting period and the 6 years before the accounting period.