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HMRC internal manual

Corporate Intangibles Research and Development Manual

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HM Revenue & Customs
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Patent Box: streaming: mandatory streaming: overview

CTA10/S357DC

There are three conditions, A, B and C, and if any of those are met streaming is mandatory (CIRD230140).

A company may meet one of the mandatory streaming conditions, but might not otherwise wish to elect to apply the streaming rules. In such cases the expenses attributable to the income which triggered the mandatory streaming must be considered and appropriately allocated to that income.

This will leave the company with other income (which may comprise both relevant IP income and non-relevant IP income) and unallocated expenses. In these cases, a pro-rata apportionment of the expenses between the relevant IP income and non-relevant IP income will often be a just and reasonable way of allocating the expenses.

Alternatively, it is possible that even where mandatory streaming applies, the only just and reasonable method of allocating expenses to the income streams is to pro-rata the expenses in the ratio of RIPI to total gross income. In this case streaming and the pro-rata approach will give the same answer.