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HMRC internal manual

Corporate Intangibles Research and Development Manual

Patent Box: supplementary: commencement and transitional provisions

Commencement Provisions

An election under CTA10/S357A usually refers to a company electing to enter the Patent Box for accounting beginning on or after 1 April 2013. However, the election can also have effect if a company has an accounting period that straddles 1 April 2013. In this case the trading profits of the company should be apportioned between the part of the accounting period which falls before 1 April 2013 and the part that falls on or after 1 April 2013 on a just and reasonable basis.

Transitional Provisions

In order to phase in the benefit of the Patent Box only a percentage of the relevant IP profits (‘RP’) of the trade will be included when calculating the Patent Box deduction (see CIRD201020 for how to calculate the Patent Box deduction).

The percentages for each financial year are:

Year 2013 2014 2015 2016 2017
Percentage of RP 60% 70% 80% 90% 100%

If an accounting period falls within more than one financial year the RP for that accounting period should be apportioned to each financial year.

Relevant IP profits - example

A company with an accounting period running from 1 January 2014 until 31 December 2014 has relevant IP profits of £100,000 in that period.

Relevant IP profits of the period £100,000
  Profits falling in FY 2013
90/365 x £100,000 £24,658  
  Profits falling in FY 2014  
275/365 x £100,000 £75,342  
  FY 2013 60% x £24,658 £14,795
  FY 2014 70% x £75,342 £52,740
  Adjusted relevant IP profits of period £67,534

Relevant IP Losses

If the company has relevant IP losses (CIRD240000) for set-off within the group or carrying forward arising in an accounting period falling wholly or partly within the financial years 2013 to 2016 then the set off amount needs to be determined by taking into account the phasing in of the Patent Box benefits.

The set-off amount is reduced according to the formula:


where P is the percentage of the RP for the financial year following the year in which the set-off amount arises.

If the set-off amount arises in 2016 or later then P is 100%.


A company has a relevant IP loss of £1,000 in APE 31 March 2014 so the company has a set-off amount of £1,000 in the FY 2013. FY 2014 follows the year in which the set-off amount arises so percentage of the RP is 70%. The set-off amount of £1,000 is reduced according to the formula:

10% X £1,000 = £143

So the set-off amount is reduced to £1,000 - £143 = £857