Calculation of patent box profits ― streaming method

Produced by a Tolley Corporation Tax expert

Corporation Tax

Guidance

Alternative method for calculating patent box profits

The legislation provides an alternative method of calculating relevant IP profits, referred to as ‘streaming’, which applies for accounting periods beginning before 1 July 2021, where the company entered the patent box regime before 1 July 2016 and the IP profits are attributable to the pre-1 July 2016 IP rights. Accounting periods that straddle 1 July 2021 are treated for this purpose only as two separate accounting periods, the second of which starts on that date.

The streaming method is not available to new entrants, which are those making their first patent box election for an accounting period which begins on or after 1 July 2016.

The usual method of calculating the relevant IP profits (the formulaic method) comprises the seven steps set out in CTA 2010, s 357C. See the Calculating relevant IP profits ― not a new entrant and no new IP rights guidance note for details.

However, a company may make a streaming election which allows it to carry out an alternative

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