Corporation Tax Act 2010 section 357CL

Companies eligible to elect for small claims treatment

Section 357CL provides a simplified method for calculating relevant IP profits under the Patent Box regime, available to companies whose qualifying residual profits are relatively small.

• A company may elect for small claims treatment if its total qualifying residual profit across all trades does not exceed £1,000,000 (Condition A), or if it meets an alternative test based on a higher threshold with additional requirements (Condition B)
• Under Condition B, the total qualifying residual profit must not exceed a "relevant maximum" of £3,000,000 (for a standalone company), and the company must not have applied the marketing assets return deduction (Step 6) when calculating its relevant IP profits in any accounting period beginning within the previous four years
• Where the company has one or more related 51% group companies that have also elected into the Patent Box, the £3,000,000 threshold is divided by the total number of such group companies (including the company itself), reducing the available maximum proportionately
• The relevant maximum is scaled down proportionately for accounting periods shorter than twelve months, and any trade whose qualifying residual profit is nil or negative is simply ignored when totalling the figures