HMRC internal manual

Corporate Intangibles Research and Development Manual

Patent Box: relevant IP profits: total gross income of a trade: finance income and excluded income

CTA10/357CB, s357BG and s357BHB

Finance income is excluded from total gross income for the Patent Box computation.Finance income has been similarly excluded from the new regime

Finance income means:

  • any trading loan relationships credits (including credits such as interest and exchange gains on money debts);
  • any amounts that GAAP treats as arising from a financial asset (such as dividends or the sale of shares). This would be likely to include income arising to a bank or other financial trader from its proprietary trading positions;
  • any return that is economically equivalent to interest (using definitions set out in the disguised interest rules in CTA09/S486B). This would include the return arising to a lessor under a finance lease; and
  • any trading credits in respect of a company’s derivative contracts (CTA09/S573). This would include gains, including exchange gains, on instruments used for hedging trading transactions.

Other income which is excluded from the Patent Box regime is summarised below:

  1. income arising from oil extraction activities or oil right
  2. income attributable to a non exclusive licence in respect of a qualifying IP right, and if an exclusive licence also confers on the company any non exclusive right that income should be apportioned on a just and reasonable basis.
  3. Income arising from RDEC credits
  4. Income from a foreign branch of a qualifying company, where that foreign branch is treated as exempt from Corporation Tax.