|
| |
|
(b) | in any other case, the amount given by—

|
| |
| |
SCT is the small claims threshold, and |
| |
T is the number of trades of the company. |
| |
(3) | The amount referred to in subsection (2)(a) is—
0.75 × QRP
|
| 5 |
| where QRP is the aggregate of the amounts of qualifying residual |
| |
profit of each trade of the company for the accounting period (but see |
| |
| |
(4) | Any amount of qualifying residual profit of a trade of the company |
| |
that is not greater than nil is to be disregarded for the purposes of |
| 10 |
| |
(5) | If the company has no associated company in the accounting period, |
| |
the small claims threshold is £1,000,000. |
| |
(6) | If the company has one or more associated companies in the |
| |
accounting period, the small claims threshold is—

|
| 15 |
| where N is the number of those associated companies in relation to |
| |
which an election under section 357A has effect for the accounting |
| |
| |
(7) | For an accounting period of less than 12 months, the small claims |
| |
threshold is proportionately reduced. |
| 20 |
(8) | Sections 25 to 30 (definition of “associated companies”) have effect |
| |
for the purposes of this section. |
| |
Marketing assets return figure |
| |
357CN | Marketing assets return figure |
| |
(1) | The marketing assets return figure in relation to a trade of a company |
| 25 |
for an accounting period is—
NMR − AMR
|
| |
| |
NMR is the notional marketing royalty in respect of the trade |
| |
for the accounting period (see section 357CO), and |
| |
AMR is the actual marketing royalty in respect of the trade for |
| 30 |
the accounting period (see section 357CP). |
| |
| |
(a) | AMR is greater than NMR, or |
| |
(b) | the difference between NMR and AMR is less than 10% of the |
| |
qualifying residual profit of the trade for the accounting |
| 35 |
| |
| the marketing assets return figure is nil. |
| |
|
| |
|
| |
|
357CO | Notional marketing royalty |
| |
(1) | The notional marketing royalty in respect of a trade of a company for |
| |
an accounting period is the appropriate percentage of the relevant IP |
| |
income for that accounting period. |
| |
| In this section “relevant IP income”, in relation to a trade of a |
| 5 |
company for an accounting period, means so much of the total gross |
| |
income of the trade for the accounting period as is relevant IP |
| |
| |
(2) | The “appropriate percentage” is the proportion of any relevant IP |
| |
income for an accounting period which the company would pay |
| 10 |
another person (“P”) for the right to exploit the relevant marketing |
| |
assets in that accounting period if the company were not otherwise |
| |
| |
(3) | For the purposes of this section a marketing asset is a “relevant |
| |
marketing asset” in relation to an accounting period if the relevant IP |
| 15 |
income of the trade of the company for the accounting period |
| |
includes any income arising from things done by the company that |
| |
involve the exploitation by the company of that marketing asset. |
| |
(4) | For the purposes of determining the appropriate percentage under |
| |
this section, assume that— |
| 20 |
(a) | the company and P are dealing at arm’s length, |
| |
(b) | the company, or the company and persons authorised by it, |
| |
will have the right to exploit the relevant marketing assets to |
| |
the exclusion of any other person (including P), |
| |
(c) | the company will have the same rights in relation to the |
| 25 |
relevant marketing assets as it actually has, |
| |
(d) | the right to exploit the relevant marketing assets is conferred |
| |
| |
(e) | the appropriate percentage for the accounting period is |
| |
determined at the beginning of the accounting period, |
| 30 |
(f) | the appropriate percentage for the accounting period will |
| |
apply for each succeeding accounting period for which the |
| |
company will have the right to exploit the relevant marketing |
| |
| |
(g) | no income other than relevant IP income will arise from |
| 35 |
anything done by the company that involves the exploitation |
| |
by the company of the relevant marketing assets. |
| |
(5) | In subsection (4)(d) “the relevant day”, in relation to a relevant |
| |
| |
(a) | the first day of the accounting period, or |
| 40 |
(b) | if later, the day on which the company first acquired the |
| |
relevant marketing asset or the right to exploit the asset. |
| |
(6) | In determining the appropriate percentage, the company must act in |
| |
| |
(a) | Article 9 of the OECD Model Tax Convention, and |
| 45 |
(b) | the OECD transfer pricing guidelines. |
| |
(7) | In this section “marketing asset” means any of the following |
| |
(whether or not capable of being transferred or assigned)— |
| |
|
| |
|
| |
|
(a) | anything in respect of which proceedings for passing off |
| |
could be brought, including a registered trade mark (within |
| |
the meaning of the Trade Marks Act 1994), |
| |
(b) | anything that corresponds to a marketing asset within |
| |
paragraph (a) and is recognised under the law of a country or |
| 5 |
territory outside the United Kingdom, |
| |
(c) | any signs or indications (so far as not falling within |
| |
paragraph (a) or (b)) which may serve, in trade, to designate |
| |
the geographical origin of goods or services, and |
| |
(d) | any information which relates to customers or potential |
| 10 |
customers of the company, or any other member of a group |
| |
of which the company is a member, and is intended to be |
| |
used for marketing purposes. |
| |
357CP | Actual marketing royalty |
| |
(1) | The actual marketing royalty in respect of a trade of a company for |
| 15 |
an accounting period is X% of the aggregate of any sums which— |
| |
(a) | were paid by the company for the purposes of acquiring any |
| |
relevant marketing assets, or the right to exploit any such |
| |
| |
(b) | were brought into account as debits in calculating the profits |
| 20 |
of the trade for the accounting period. |
| |
| |
“relevant marketing assets” has the same meaning as in section |
| |
| |
“X%” is the percentage given by Step 2 in section 357C(1). |
| 25 |
Profits arising before grant of right |
| |
357CQ | Profits arising before grant of right |
| |
(1) | This section applies where a company— |
| |
(a) | holds a right mentioned in paragraph (a), (b) or (c) of section |
| |
357BB(1) (rights to which this Part applies) or an exclusive |
| 30 |
licence in respect of such a right, or |
| |
(b) | would hold such a right or licence but for the fact that the |
| |
company disposed of any rights in the invention or (as the |
| |
case may be) the licence before the right was granted. |
| |
(2) | The company may elect that, for the purposes of determining the |
| 35 |
relevant IP profits of a trade of the company for the accounting |
| |
period in which the right is granted, there is to be added the amount |
| |
determined in accordance with subsection (3) (the “additional |
| |
| |
(3) | The additional amount is the difference between— |
| 40 |
(a) | the aggregate of the relevant IP profits of the trade for each |
| |
relevant accounting period, and |
| |
(b) | the aggregate of what the relevant IP profits of the trade for |
| |
each relevant accounting period would have been if the right |
| |
had been granted on the relevant day. |
| 45 |
|
| |
|
| |
|
(4) | For the purposes of determining the additional amount, the amount |
| |
of any relevant IP profits to which section 357A does not apply by |
| |
virtue of Chapter 5 (relevant IP losses) is to be disregarded. |
| |
(5) | In this section “relevant accounting period” means— |
| |
(a) | the accounting period of the company in which the right is |
| 5 |
| |
(b) | any earlier accounting period of the company which meets |
| |
the conditions in subsection (6). |
| |
(6) | The conditions mentioned in subsection (5)(b) are— |
| |
(a) | that it is an accounting period for which an election made by |
| 10 |
the company under section 357A has effect, |
| |
(b) | that it is an accounting period for which the company is a |
| |
| |
(c) | that it ends on or after the relevant day. |
| |
(7) | In this section “the relevant day” is the later of— |
| 15 |
(a) | the first day of the period of 6 years ending with the day on |
| |
which the right is granted, or |
| |
| |
(i) | the application for the grant of the right was filed, or |
| |
(ii) | in the case of a company that holds an exclusive |
| 20 |
licence in respect of the right, the licence was granted. |
| |
(8) | Where the company would be a qualifying company for an |
| |
accounting period but for the fact that the right had not been granted |
| |
at any time during that accounting period, the company is to be |
| |
treated for the purposes of this section as if it were a qualifying |
| 25 |
company for that accounting period. |
| |
(9) | Where the company would be a qualifying company for the |
| |
accounting period in which the right was granted but for the fact that |
| |
the company disposed of the rights or licence mentioned in |
| |
subsection (1)(b) before the right was granted, the company is to be |
| 30 |
treated for the purposes of section 357A as if it were a qualifying |
| |
company for that accounting period. |
| |
| |
| |
357D | Alternative method of calculating relevant IP profits: “streaming” |
| 35 |
(1) | A company may elect to apply section 357DA (instead of section |
| |
357C) for the purposes of determining the relevant IP profits of any |
| |
trade of the company for an accounting period. |
| |
(2) | An election made under subsection (1) is known as a “streaming |
| |
| 40 |
(3) | A streaming election has effect— |
| |
(a) | for the accounting period for which it is made, and |
| |
(b) | for each subsequent accounting period. |
| |
| This is subject to section 357DB. |
| |
|
| |
|
| |
|
(4) | If any of the mandatory streaming conditions in section 357DC is met |
| |
in relation to a trade of a company for an accounting period, the |
| |
company must apply section 357DA (instead of section 357C) for the |
| |
purposes of determining the relevant IP profits of the trade for that |
| |
| 5 |
357DA | Relevant IP profits |
| |
(1) | To determine the relevant IP profits of a trade of a company for an |
| |
accounting period in accordance with this section— |
| |
| |
| Take any amounts which are brought into account as credits in |
| 10 |
calculating the profits of the trade for the accounting period, other |
| |
than any amounts of finance income (see section 357CB), and divide |
| |
them into two “streams”, amounts of relevant IP income (see sections |
| |
357CC and 357CD) and amounts that are not amounts of relevant IP |
| |
| 15 |
| The stream consisting of relevant IP income is “the relevant IP |
| |
| |
| |
| Take any amounts which are brought into account as debits in |
| |
calculating the profits of the trade for the accounting period, other |
| 20 |
than any amounts referred to in section 357CG(3), and allocate them |
| |
on a just and reasonable basis between the two streams. |
| |
| (See also section 357CG(5).) |
| |
| |
| Deduct from the relevant IP income stream the amounts allocated to |
| 25 |
that stream under Step 2. |
| |
| |
| Deduct from the amount given by Step 3 the routine return figure |
| |
| |
| The amount given by this step is the “qualifying residual profit”. |
| 30 |
| If the amount of the qualifying residual profit is not greater than nil, |
| |
| |
| |
| If the company has elected for small claims treatment, calculate the |
| |
small claims amount in relation to the trade (see section 357CM). |
| 35 |
| If the company has not, go to Step 6. |
| |
| |
| Deduct from the qualifying residual profit the marketing assets |
| |
return figure (see section 357CN and subsection (6)). |
| |
| 40 |
| If the company has made an election under section 357CQ (which |
| |
provides in certain circumstances for profits arising before the grant |
| |
of a right to be treated as relevant IP profits), add to the amount |
| |
given by Step 5 or 6 (or, if the amount of the qualifying residual profit |
| |
was not greater than nil, Step 4) any amount determined in |
| 45 |
accordance with subsection (3) of that section. |
| |
|
| |
|
| |
|
(2) | If the amount given by subsection (1) is greater than nil, that amount |
| |
is the relevant IP profits of the trade for the accounting period. |
| |
(3) | If the amount given by subsection (1) is less than nil, that amount is |
| |
the relevant IP losses of the trade for the accounting period (see |
| |
| 5 |
(4) | The routine return figure, in relation to a trade of a company for an |
| |
accounting period, is 10% of the aggregate of any routine deductions |
| |
| |
(a) | have been made by the company in calculating the profits of |
| |
the trade for the accounting period, and |
| 10 |
(b) | have been allocated to the relevant IP income stream under |
| |
| |
| In this subsection “routine deductions” is to be read in accordance |
| |
with sections 357CJ and 357CK. |
| |
(5) | Subsections (2) and (3) of section 357CI have effect for the purposes |
| 15 |
of subsection (4) of this section as they have effect for the purposes of |
| |
| |
(6) | For the purposes of determining the marketing assets return figure |
| |
in Step 6, section 357CP (actual marketing royalty) has effect as if the |
| |
reference to X% of the aggregate of any sums falling within |
| 20 |
subsection (1) of that section were a reference to the aggregate of any |
| |
such sums which have been allocated to the relevant IP income |
| |
| |
357DB | Method of allocation |
| |
(1) | In this section “method of allocation” means the method of |
| 25 |
allocating, for the purposes of Step 2 in section 357DA(1), the |
| |
amounts mentioned in that step. |
| |
(2) | A company that applies section 357DA for the purposes of |
| |
determining the relevant IP profits of a trade of the company for an |
| |
accounting period must use the same method of allocation in relation |
| 30 |
to the trade for that accounting period as it used in the last |
| |
accounting period of the company for which it applied that section |
| |
for the purposes of determining the relevant IP profits of the trade. |
| |
(3) | But subsection (2) does not apply if there is a change of |
| |
circumstances relating to the trade which makes the use of that |
| 35 |
method of allocation in relation to the trade for the accounting period |
| |
| |
(4) | In such a case, the company may— |
| |
(a) | use a different method of allocation in relation to the trade for |
| |
the accounting period (and subsection (2) applies |
| 40 |
accordingly for subsequent accounting periods), or |
| |
(b) | elect not to apply section 357DA for the purposes of |
| |
determining the relevant IP profits of the trade for the |
| |
| |
(5) | Subsection (4)(b) does not prevent the company making a fresh |
| 45 |
streaming election in relation to the trade for any subsequent |
| |
| |
|
| |
|