Section 1112E — Corporation Tax Act 2009: Exception for companies creating or managing intellectual property

Exception for companies creating or managing intellectual property 1112E 1 There is no cap by reference to a company’s PAYE and NIC liabilities for an accounting period if the company meets conditions A and B.

2 A company meets condition A for an accounting period if, during the period, the company is engaged in—

a taking, or preparing to take, steps in order that relevant intellectual property will be created by it, b creating relevant intellectual property, or c performing a significant amount of management activity in relation to relevant intellectual property it holds.

3 For the purposes of subsection (2) —

a a company is only engaged in an activity mentioned in paragraph (a) , (b) or (c) of subsection (2) if the activity is wholly or mainly undertaken by employees of the company;

b intellectual property is “relevant” intellectual property in relation to a company if the whole or the greater part (in terms of value) of it is created by the company;

c intellectual property is created by a company if it is created in circumstances in which the right to exploit it vests in the company (whether alone or jointly with others).

4 For the purposes of this section— “ intellectual property ” means— any patent, trade mark, registered design, copyright, design right or plant breeder’s right, any rights under the law of a country or territory outside the United Kingdom which correspond or are similar to those falling within paragraph (a), or any information or technique not protected by a right within paragraph (a) or (b) but having industrial, commercial or other economic value; “ management activity ”, in relation to intellectual property, means formulating plans and making decisions in relation to the development or exploitation of the intellectual property.

5 A company meets condition B for an accounting period if the amount (if any) given by subsection (6) does not exceed 15% of the company’s qualifying expenditure for the period.

6 The amount given by this subsection is the sum of the following incurred by the company in the period—

a qualifying expenditure on externally provided workers (see section 1127), where the company, the staff provider and (if different) the staff controller (or staff controllers)—

i are all connected, or ii have jointly elected (under section 1130) that section 1129 is to apply to them as if they were all connected;

b qualifying contractor expenditure, where the company and the contractor—

i are connected, or ii have jointly elected (under section 1135) that section 1134 is to apply to them as if they were connected.

7 In subsection (6) (b) , “qualifying contractor expenditure” has whichever of the meanings given by 1112C (7) corresponds to the purpose for which this section is being applied.

8 The Treasury may by regulations replace the percentage for the time being specified in subsection (5) with a different percentage.