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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: relevant IP losses: set-off amount: allocation within a group

CTA10/S357EB

If there is a set-off amount in relation to a trade of a company for an accounting period, the company is a member of a group, and the amount has not been reduced to nil by the set-off against any relevant IP profits (‘RP’) of another Patent Box trade (CIRD240120), the remaining set-off amount is to be reduced (but not to below nil) by any RP of a trade of a relevant group member for the relevant accounting period.

‘Relevant group member’ means another member of the group (CIRD260140) that has elected into the Patent Box scheme and is a qualifying company for the relevant accounting period.

‘Relevant accounting period’ means an accounting period of a company that has a set-off amount where it ends at the same time as or is within an accounting period of the relevant group member.

Again, any RP of another relevant group member used to reduce the set-off amount is no longer eligible to be included in calculating that relevant group member’s Patent Box deduction for that accounting period.

Where there is more than one relevant group member, the relevant group members may jointly determine the order in which the set-off is to be made.

If no determination is made, the set-off amount is to be applied first to the trade that has the greatest amount of RP of any trade of any of the relevant group members for a relevant accounting period, then to the trade that has the second greatest amount of RP of any of those trades for such a period, and so on until either all of the set-off amount has been allocated or there are no RP remaining against which to allocate the remainder.

Tax free payments can be made between group companies to compensate for RP being reduced by set-off amounts of other group companies (CIRD240170).