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Calculating relevant IP losses

A company may elect that any relevant IP profits of a trade for accounting periods during which it is a qualifying company are chargeable at a lower effective rate of corporation tax (currently an effective rate of 10%). See the Patent box tax regime ― overview guidance note for details.

Such an election is given effect by allowing a deduction to be made in calculating the profits of the trade for corporation tax purposes. However, it is possible that the result of the calculations performed in arriving at the relevant IP profits is negative. This figure is known as a relevant IP loss. In these circumstances, there are no profits from which the deduction can be made to give effect to the reduced patent box rate of corporation tax.

A company which has not already elected into the patent box regime is unlikely to make such an election for the first time during a loss making period. This is because the losses can only be relieved in a certain way (see