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HMRC internal manual

Corporate Intangibles Research and Development Manual

Patent Box: relevant IP profits: relevant IP income: notional royalties: leasing income

Leasing income does not come within any of the heads of S357CC and so cannot be relevant IP income. It is possible that a company may be able to compute a notional royalty in respect of patents used in generating such income.

If a company leases an asset under a finance lease then it is likely that the lease will produce for the company a return that is economically equivalent to interest. Such income is not included within total gross income and so no notional royalty can be computed.

By contrast where the lessor retains the risk and rewards of ownership of the leased asset, it is unlikely that the lease will produce such a return. In such a case, the company will be able to compute a notional royalty, subject to meeting the normal conditions.