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HMRC internal manual

Corporate Intangibles Research and Development Manual

Patent Box: relevant IP profits: relevant IP income: overview


Relevant IP income is the income derived from the exploitation of qualifying IP rights as defined in S357CC. S357CC (12) ensures that a company is regarded as holding a qualifying IP right if it holds an exclusive licence of the right.

In many cases ‘RIPI’ and ‘relevant IP income’ will be synonymous. However RIPI is defined in 357C(1) and in order for relevant IP income to be RIPI it must be included in the total gross income of the trade. For example, RIPI could never include finance income because such income is excluded from total gross income. RIPI cannot include any income not taken into account in computing trading profits.

The legislation splits the exploitation of IP rights into five different heads:

CIRD220170 Head 1 - sales income
CIRD220200 Head 2 - licence fees
CIRD220220 Head 3 - proceeds of sale
CIRD220230 Head 4 - damages for infringement
CIRD220240 Head 5 - other compensation

If a company derives some of its total gross income from the exploitation of the patented invention but the income does not fall into any of the five heads, it may be able to deem some of that income to be RIPI as a ‘notional royalty’ for the patented item (CIRD220250).