|
| |
|
357DC | The mandatory streaming conditions |
| |
(1) | Mandatory streaming condition A is met in relation to a trade of a |
| |
company for an accounting period if— |
| |
(a) | any amount brought into account as a credit in calculating |
| |
the profits of the trade for the accounting period is not fully |
| 5 |
recognised as revenue for the accounting period, and |
| |
(b) | the amount, or the aggregate of any such amounts, is |
| |
| |
(2) | An amount is a “substantial” amount for the purposes of this section |
| |
| 10 |
| |
(b) | 20% of the total gross income of the trade for the accounting |
| |
| |
| |
(3) | But an amount is not a substantial amount for the purposes of this |
| 15 |
section if it does not exceed £50,000. |
| |
(4) | The reference in subsection (1)(a) to an amount brought into account |
| |
as a credit includes a reference to any amount brought into account |
| |
by virtue of section 147 of TIOPA 2010 (basic transfer-pricing rule). |
| |
(5) | Mandatory streaming condition B is met in relation to a trade of a |
| 20 |
company for an accounting period if the total gross income of the |
| |
trade for the accounting period includes— |
| |
(a) | relevant IP income, and |
| |
(b) | a substantial amount of licensing income that is not relevant |
| |
| 25 |
(6) | In subsection (5) “licensing income” means income consisting of any |
| |
licence fee, royalty or other payment which the company has |
| |
received under an agreement granting another person any right in |
| |
respect of any intellectual property held by the company. |
| |
| “Intellectual property” has the meaning given by section 712(3) of |
| 30 |
| |
(7) | Mandatory streaming condition C is met in relation to a trade of a |
| |
company for an accounting period if the total gross income of the |
| |
trade for the accounting period includes— |
| |
(a) | income that is not relevant IP income, and |
| 35 |
(b) | a substantial amount of relevant Head 2 income. |
| |
(8) | Income is “relevant Head 2 income” for the purposes of subsection |
| |
| |
(a) | it is relevant IP income received under an agreement falling |
| |
within subsection (6) of section 357CC, and |
| 40 |
(b) | every qualifying IP right— |
| |
(i) | in respect of which a right within paragraph (a) of that |
| |
subsection is granted by the agreement, or |
| |
(ii) | which is granted in respect of an invention in respect |
| |
of which a right within paragraph (b) of that |
| 45 |
subsection is granted by the agreement, |
| |
|
| |
|
| |
|
| is a right in respect of which the company holds an exclusive |
| |
| |
| |
(a) | relevant IP income is received under an agreement falling |
| |
within section 357CC(6), but |
| 5 |
(b) | the condition in paragraph (b) of subsection (8) above is not |
| |
| |
| so much of the relevant IP income as on a just and reasonable |
| |
apportionment is attributable to any qualifying IP right falling |
| |
within that paragraph is relevant Head 2 income for the purposes of |
| 10 |
| |
| |
| |
357E | Company with relevant IP losses: set-off amount |
| |
| Where a company would be entitled to make a deduction under |
| 15 |
section 357A(2) in calculating the profits of a trade of the company |
| |
for an accounting period but for the fact that there are relevant IP |
| |
losses of the trade for the accounting period, there is a “set-off |
| |
amount” in relation to the trade of the company for the accounting |
| |
period which is equal to the amount of the relevant IP losses. |
| 20 |
357EA | Effect of set-off amount on company with more than one trade |
| |
(1) | This section applies where— |
| |
(a) | there is a set-off amount in relation to a trade of a company |
| |
for an accounting period, and |
| |
(b) | the company carries on any other trade. |
| 25 |
(2) | The set-off amount is to be reduced (but not to below nil) by any |
| |
relevant IP profits of that other trade for the accounting period. |
| |
(3) | Section 357A does not apply in relation to so much of the amount of |
| |
relevant IP profits of that other trade for the accounting period as is |
| |
equal to the amount by which the set-off amount is reduced under |
| 30 |
| |
357EB | Allocation of set-off amount within a group |
| |
(1) | This section applies where— |
| |
(a) | there is a set-off amount in relation to a trade of a company |
| |
for an accounting period, |
| 35 |
(b) | the company is a member of a group, and |
| |
(c) | the set-off amount has not been reduced to nil by the |
| |
operation of section 357EA(2). |
| |
(2) | The set-off amount (or so much of it as remains after the operation of |
| |
section 357EA(2)) is to be reduced (but not to below nil) by any |
| 40 |
relevant IP profits of a trade of a relevant group member for the |
| |
relevant accounting period. |
| |
(3) | For the purposes of this section— |
| |
|
| |
|
| |
|
(a) | “relevant group member” means another member of the |
| |
group that has made an election under section 357A and is a |
| |
qualifying company for the relevant accounting period, and |
| |
(b) | “relevant accounting period”, in relation to a company, |
| |
means the accounting period of the company in or at the end |
| 5 |
of which the accounting period mentioned in subsection |
| |
| |
(4) | Section 357A does not apply in relation to so much of the amount of |
| |
relevant IP profits of the trade of the relevant group member for the |
| |
relevant accounting period as is equal to the amount by which the |
| 10 |
set-off amount (or so much of it as remains after the operation of |
| |
section 357EA(2)) is reduced under subsection (2). |
| |
(5) | Where there is more than one relevant group member, the relevant |
| |
group members may jointly determine the order in which subsection |
| |
| 15 |
(6) | If no determination is made under subsection (5), subsection (2) is to |
| |
apply first to the trade that has the greatest amount of relevant IP |
| |
profits 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 relevant IP profits of any of those trades for such |
| 20 |
| |
357EC | Carry-forward of set-off amount |
| |
(1) | This section applies where— |
| |
(a) | there is a set-off amount in relation to a trade of a company |
| |
for an accounting period, and |
| 25 |
(b) | the set-off amount has not been reduced to nil by the |
| |
operation of section 357EA(2) or 357EB(2). |
| |
(2) | The set-off amount (or so much of it as remains after the operation of |
| |
section 357EA(2) or 357EB(2)) is to be reduced (but not to below nil) |
| |
by the amount of any relevant IP profits of the trade of the company |
| 30 |
for the current accounting period. |
| |
| The “current accounting period” is the accounting period |
| |
immediately following the accounting period mentioned in |
| |
| |
(3) | Section 357A does not apply in relation to so much of the amount of |
| 35 |
relevant IP profits of the trade of the company for the current |
| |
accounting period as is equal to the amount by which the set-off |
| |
amount (or so much of it as remains after the operation of section |
| |
357EA(2) or 357EB(2)) is reduced under subsection (2). |
| |
(4) | If any portion of the set-off amount remains after the operation of |
| 40 |
subsection (2), that portion (“the remaining portion”) is to be treated |
| |
as the set-off amount in relation to the trade of the company for the |
| |
current accounting period (and the provisions of this Chapter apply |
| |
| |
(5) | If there are relevant IP losses of the trade of the company for the |
| 45 |
current accounting period, the set-off amount in relation to the trade |
| |
of the company for that accounting period is the aggregate of the |
| |
remaining portion and an amount equal to the amount of those |
| |
|
| |
|
| |
|
relevant IP losses (and the provisions of this Chapter apply |
| |
| |
357ED | Company ceasing to carry on trade, etc |
| |
(1) | This section applies where— |
| |
(a) | there is a set-off amount in relation to a trade of a company |
| 5 |
for an accounting period, and |
| |
(b) | at any time in the accounting period immediately following |
| |
that accounting period, the company meets any of the |
| |
conditions in subsection (2). |
| |
| 10 |
(a) | that the company ceases to carry on the trade, |
| |
(b) | that the company ceases to be within the charge to |
| |
corporation tax in respect of the trade, or |
| |
(c) | that any election made by the company under section 357A |
| |
| 15 |
(3) | Sections 357EA to 357EC continue to have effect in relation to the set- |
| |
off amount subject to the following provisions of this section. |
| |
(4) | Section 357EB has effect as if— |
| |
(a) | the reference in subsection (1)(b) to the company being a |
| |
member of a group were a reference to the company having |
| 20 |
been a member of the group at the time referred to in |
| |
subsection (1)(b) of this section, |
| |
(b) | for subsection (2) there were substituted— |
| |
“(2) | The set-off amount (or so much of it as remains after |
| |
the operation of section 357EA(2)) is to become, or be |
| 25 |
added to, the set-off amount in relation to a trade of a |
| |
relevant group member for the relevant accounting |
| |
| |
(c) | subsection (4) were omitted, |
| |
(d) | for the words after “determine” in subsection (5) there were |
| 30 |
substituted “the relevant group member to which subsection |
| |
| |
(e) | for subsection (6) there were substituted— |
| |
“(6) | If no determination is made under subsection (5), |
| |
subsection (2) is to apply to the trade that has the |
| 35 |
greatest amount of relevant IP profits of any trade of |
| |
any of the relevant group members for a relevant |
| |
| |
(7) | If there is no relevant group member with any |
| |
relevant IP profits of a trade for the relevant |
| 40 |
accounting period, subsection (2) is to apply to the |
| |
trade that has the greatest set-off amount in relation to |
| |
any trade of any of the relevant group members for a |
| |
relevant accounting period.” |
| |
(5) | Sections 357EA to 357EC cease to have effect in relation to the set-off |
| 45 |
amount in relation to the trade of the company for an accounting |
| |
| |
|
| |
|
| |
|
(a) | the company is not carrying on any other trade in that |
| |
| |
(b) | in the case of a company that was a member of a group at the |
| |
time referred to in subsection (1)(b) of this section, none of the |
| |
members of the group is a relevant group member (within |
| 5 |
the meaning of section 357EB). |
| |
(6) | In such a case, the set-off amount (so far as remaining after the |
| |
operation of those sections) is to be reduced to nil. |
| |
357EE | Transfer of a trade between group members |
| |
(1) | This section applies where— |
| 10 |
(a) | there is a set-off amount in relation to a trade of a company |
| |
for an accounting period, |
| |
(b) | the company is a member of a group, |
| |
(c) | the company ceases to carry on the trade, and |
| |
(d) | another company (“the transferee”) that is a member of the |
| 15 |
group begins to carry on that trade. |
| |
(2) | For the purposes of this Chapter an amount equal to the set-off |
| |
amount is to become, or be added to, the set-off amount in relation to |
| |
the trade of the transferee for the accounting period in which the |
| |
transferee begins to carry on the trade. |
| 20 |
357EF | Payments between group members in consequence of section 357EB |
| |
(1) | This section applies if— |
| |
(a) | there is a set-off amount in relation to a trade of a company |
| |
for an accounting period, |
| |
(b) | subsection (2) of section 357EB has effect in relation to a |
| 25 |
relevant group member for the relevant accounting period |
| |
(within the meaning of that section), |
| |
(c) | the company and the relevant group member have an |
| |
agreement between them in relation to the relevant IP losses |
| |
| 30 |
(d) | as a result of the agreement the company makes a payment to |
| |
the relevant group member that does not exceed the |
| |
reduction in the relevant IP profits of the relevant group |
| |
member arising under section 357EB(4). |
| |
| 35 |
(a) | is not to be taken into account in determining the profits or |
| |
losses of either company for corporation tax purposes, and |
| |
(b) | is not for any purposes of the Corporation Tax Acts to be |
| |
regarded as a distribution. |
| |
(3) | In a case where section 357ED applies (company ceasing to carry on |
| 40 |
trade, etc), the reference in subsection (1)(d) to the reduction in the |
| |
relevant IP profits of the relevant group member is to be read as a |
| |
reference to the amount that becomes, or is added to, the set-off |
| |
amount in relation to a trade of the relevant group member for the |
| |
relevant accounting period under section 357EB(2). |
| 45 |
|
| |
|
| |
|
| |
| |
Licences conferring exclusive rights |
| |
357F | Licences conferring exclusive rights |
| |
| A licence that confers any right in respect of a qualifying IP right to |
| 5 |
the exclusion of all other persons is not to be regarded as an exclusive |
| |
licence if the main purpose, or one of the main purposes, of |
| |
conferring the right is to secure that the licence is an exclusive licence |
| |
for the purposes of this Part. |
| |
Incorporation of qualifying items |
| 10 |
357FA | Incorporation of qualifying items |
| |
(1) | Income arising from the sale of any item that incorporates a |
| |
qualifying item is not relevant IP income if the main purpose, or one |
| |
of the main purposes, of incorporating the qualifying item is to |
| |
secure that income arising from any such sale is relevant IP income. |
| 15 |
(2) | “Qualifying item” has the same meaning as in section 357CC(2). |
| |
| |
357FB | Tax advantage schemes |
| |
(1) | This section applies where— |
| |
(a) | a company is entitled to make a deduction under section |
| 20 |
357A(2) in calculating the profits of a trade of the company |
| |
for an accounting period, |
| |
(b) | the company is or has at any time been a party to a scheme, |
| |
| |
(c) | the main purpose, or one of the main purposes, of the |
| 25 |
company or, where the company is a member of a group, any |
| |
member of the group in being a party to the scheme is (or |
| |
was) to obtain the chance of securing a relevant tax |
| |
| |
(2) | There is a “relevant tax advantage” for the purposes of this section |
| 30 |
| |
(a) | (apart from this section) there would be an increase in the |
| |
amount of any deduction made under section 357A(2) in |
| |
calculating the profits of a trade of the company or (as the |
| |
case may be) any other member of the group for any |
| 35 |
| |
(b) | the increase would arise from— |
| |
(i) | the avoidance of the operation of any provision of this |
| |
| |
(ii) | artificially inflating the amount of relevant IP income |
| 40 |
brought into account in calculating those profits (see |
| |
| |
|
| |
|
| |
|
(iii) | a mismatch between relevant IP income and |
| |
expenditure (see subsection (4)). |
| |
(3) | The reference in subsection (2)(b) to artificially inflating the amount |
| |
of relevant IP income brought into account in calculating the profits |
| |
mentioned in subsection (2)(a) is a reference to doing any of the |
| 5 |
| |
(a) | bringing into account in calculating those profits an amount |
| |
of relevant IP income that wholly or substantially |
| |
corresponds to an increase in the amounts brought into |
| |
account as debits in calculating those profits; |
| 10 |
(b) | bringing into account in calculating those profits an |
| |
additional amount of relevant IP income that wholly or |
| |
substantially corresponds to a decrease in the amount of |
| |
income that is not relevant IP income which is brought into |
| |
account in calculating those profits. |
| 15 |
(4) | For the purposes of this section there is a mismatch between relevant |
| |
IP income and expenditure if— |
| |
(a) | any relevant IP income brought into account in calculating |
| |
the profits mentioned in subsection (2)(a) is attributable to |
| |
any qualifying IP right or an exclusive licence in respect of |
| 20 |
| |
(b) | any expenditure incurred in relation to that right is brought |
| |
into account in calculating the profits of a trade of the |
| |
company or (as the case may be) any other member of the |
| |
group for an accounting period for which an election under |
| 25 |
section 357A did not have effect. |
| |
(5) | The amount of the deduction which may be made by the company |
| |
for the accounting period mentioned in subsection (1)(a) is the |
| |
amount that would secure that no relevant tax advantage arises (and |
| |
| 30 |
(6) | In this section “scheme” includes any scheme, arrangements or |
| |
understanding of any kind whatever, whether or not legally |
| |
enforceable, involving a single transaction or two or more |
| |
| |
| 35 |
| |
Elections under section 357A |
| |
357G | Making of election under section 357A |
| |
(1) | An election made by a company under section 357A is made by |
| |
giving notice to an officer of Revenue and Customs. |
| 40 |
(2) | The notice must specify the first accounting period of the company |
| |
for which the election is to have effect. |
| |
(3) | The notice must be given on or before the last day on which an |
| |
amendment of the company’s tax return for that accounting period |
| |
could be made under paragraph 15 of Schedule 18 to FA 1998. |
| 45 |
|
| |
|