Corporation Tax Act 2010 section 357EC

Carry-forward of set-off amount

Section 357EC sets out how unrelieved set-off amounts arising from relevant IP losses are carried forward to subsequent accounting periods and offset against future relevant IP profits.

• Where a set-off amount from an earlier period has not been fully used against IP profits in the company's other trades or within the group, the remaining balance is carried forward to the next accounting period.
• The carried-forward set-off amount is first applied to reduce any relevant IP profits of the same trade in the following accounting period, and a matching amount of those IP profits loses access to the Patent Box reduced rate of corporation tax.
• If any set-off amount still remains after being applied against the following period's IP profits, that residual balance is treated as a set-off amount for that later period and can be allocated further under the chapter's rules, including the group allocation provisions.
• Where the company also has new relevant IP losses in the later period, those losses are added to any carried-forward set-off amount to produce a combined set-off amount for that period, which is then subject to the same allocation rules.