Section 357BH — Corporation Tax Act 2010: Relevant IP income

Relevant IP income 357BH 1 For the purposes of this Part “ relevant IP income ” means income falling within any of the Heads set out in—

a subsection (2) (sales income),

b subsection (6) (licence fees),

c subsection (7) (proceeds of sale etc ),

d subsection (8) (damages for infringement),

and e subsection (9) (other compensation). This is subject to section 357BHB (excluded income).

2 Head 1 is income arising from the sale by the company of any of the following items—

a items in respect of which a qualifying IP right held by the company has been granted (“qualifying items”);

b items incorporating one or more qualifying items;

c items that are wholly or mainly designed to be incorporated into items within paragraph (a) or (b).

3 For the purposes of this Part an item and its packaging are not to be treated as a single item, unless the packaging performs a function that is essential for the use of the item for the purposes for which it is intended to be used.

4 In subsection (3) “ packaging ”, in relation to an item, means any form of container or other packaging used for the containment, protection, handling, delivery or presentation of the item, including by way of attaching the item to, or winding the item round, some other article.

5 In a case where a qualifying item and an item that is designed to incorporate that item (“the parent item”) are sold together as, or as part of, a single unit for a single price, the reference in subsection (2)(b) to an item incorporating a qualifying item includes a reference to the parent item.

6 Head 2 is income consisting of any licence fee or royalty which the company receives under an agreement granting another person any of the following rights only—

a a right in respect of any qualifying IP right held by the company, b any other right in respect of a qualifying item or process, and c in the case of an agreement granting any right within paragraph (a) or (b), a right granted for the same purposes as those for which that right was granted. In this subsection “ qualifying process ” means a process in respect of which a qualifying IP right held by the company has been granted.

7 Head 3 is any income arising from the sale or other disposal of a qualifying IP right or an exclusive licence in respect of such a right.

8 Head 4 is any amount received by the company in respect of an infringement, or alleged infringement, of a qualifying IP right held by the company at the time of the infringement or alleged infringement.

9 Head 5 is any amount of damages, proceeds of insurance or other compensation, other than an amount in respect of an infringement or alleged infringement of a qualifying IP right, which is received by the company in respect of an event and—

a is paid in respect of any items that fell within subsection (2) at the time of that event, or b represents a loss of income which would, if received by the company at the time of that event, have been relevant IP income.

10 But income is not relevant IP income by virtue of subsection (8) or (9) unless the event in respect of which the income is received, or any part of that event, occurred at a time when—

a the company was a qualifying company, and b an election under section 357A(1) had effect in relation to it.

11 In a case where the whole of that event does not occur at such a time, subsection (8) or (9) (as the case may be) applies only to so much of the amount received by the company in respect of the event as on a just and reasonable apportionment is properly attributable to such a time.

12 Any reference in this section to a qualifying IP right held by the company includes a reference to a qualifying IP right in respect of which the company holds an exclusive licence.