Patent Box: relevant IP profits: steps for calculating relevant IP profits of a trade
S357C lists the steps in the calculation of the relevant IP profit. These will apply unless the company elects or is mandated into the streaming rules (see CIRD230000+).
Calculate the total gross income of the trade for the accounting period (CIRD220120).
Total gross income includes revenue receipts but excludes finance income (CIRD220130).
Calculate the percentage (X%) given by the formula -
- RIPI is so much of the total gross income of the trade for the accounting period as is relevant IP income (CIRD220150), and
- TI is the total gross income of the trade for the accounting period.
Calculate X% of the profits of the trade for the accounting period.
If there are no such profits, calculate the X% of the losses (expressed as a negative figure) for the accounting period.
In calculating the profits of the trade for the purposes of this step, make any adjustments required in CIRD220400.
Deduct from the amount given by Step 3, the routine return figure (10% of certain trading expenses) (CIRD220430). This gives rise to the ‘qualifying residual profit’ (QRP). If the QRP is nil or a loss, go to Step 7.
If the company has claimed the small claims treatment in relation to its marketing asset return, calculate the small claims amount in relation to the trade and ignore Step 6 (CIRD220470). Otherwise go to Step 6.
Deduct from the QRP, the marketing assets return figure (CIRD220490).
If the company has made an election for profits arising before the grant of a right, add to the amount given by Step 5 or 6 (or, if the amount of QRP was not greater than nil, Step 4) any amount so determined (CIRD220540).
This can give rise to a relevant IP profit or a relevant IP loss.