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HMRC internal manual

Corporate Intangibles Research and Development Manual

Patent Box: supplementary: cost sharing arrangements


What is a Cost Sharing Arrangement?

A cost-sharing arrangement (‘CSA’) is a commercial arrangement allowing businesses to share the costs and risks of developing, producing or obtaining assets, services or rights. The participants will expect to receive benefits in proportion to their contribution to the activities within the CSA.

A CSA may establish a separate legal entity or simply amount to contractual arrangements. Where the former is the case and the CSA is a separate company or partnership then the normal Patent Box calculation will be applied to that company or to the corporate partners (see CIRD260120) respectively.

But where there is no such entity then special rules apply to the Patent Box claim because a company claiming under a Patent Box election may not satisfy the normal ownership requirements, for example because the IP may be held by another company in the CSA.

The intention of these provisions is to allow corporate parties to a CSA to qualify for the Patent Box on the same basis as those outside of a CSA.

A company may have made a s357A(1) election based on having relevant IP income outside the CSA, in which case the election will also apply to the share of relevant IP income from the CSA.


The definition originally within CTA10/s357GC no longer applies to anyone with effect for accounting periods starting on or after 1 April 2017 as it has been superseded by a revised, wider definition which is discussed at CIRD276050. CSAs included within the original definition will still be included within the revised definition.

Changes were introduced from 1 April 2017 to align the treatment of R&D undertaken within CSAs with the changes made to the rest of the Patent Box legislation in FA16, described in Chapter CIRD270000.

An explanation of how to identify when a company has new qualifying IP rights is at CIRD260135. The new CSA rules are at CIRD276050 with examples in CIRD276200.


The original s357GC defined a CSA starting before 1 April 2017 such that:

If one of the parties to the arrangement held a qualifying right (or exclusive licence to a qualifying right) and each party to the arrangement was required to contribute to the creation or development of the right or an item or process incorporating it (either by taking part or by paying towards the activity), which included developing ways in which the invention might be used or applied

and either

  • was entitled to a proportionate share of the income from exploiting the right that is proportionate to its participation in the arrangement,


  • had one or more rights in respect of the invention as a result of which it received income proportionate to its participation,

    then the company is treated as if it held the relevant right, even if it did not hold the qualifying IP right or exclusive licence.

The company would therefore be entitled to claim the benefits of the regime in relation to that right subject to the normal rules of CTA10/Part 8A.

S357GC does not apply where the arrangement produces for the company a return within S357BG(1)(c)(economically equivalent to interest - see CIRD220130).


Three companies A, B and C have R&D facilities which allow them to carry on complementary R&D in different fields of research with a view to combining the results into one specific product. There is no guarantee that the costs of each specialist area of research will be equal, so the participators may agree that the income arising from any resultant IP (including, but not exclusive to, patents) will be split according to the relative costs incurred by each participator.

It would also be acceptable to apportion costs based on anticipated income from the invention for each contributor’s field of use or geographical location, if the facts support that arrangement within the CSA.

Alternatively they may agree that the costs incurred by each participator should be recorded and that the greatest contributor will be reimbursed a proportion of their costs by the other participators. The income arising from the resultant IP would then be split equally between the participators, resulting in both costs and income being split equally across the participators.

Accordingly, each of the participators will have contributed to the development of the IP and will be entitled to a share of the income from that IP as a result. To the extent that this income includes income from a qualifying patent it should qualify for the Patent Box just as it would if it were not within a CSA.