CIRD220160 - Patent Box: relevant IP profits: relevant IP income: overview

CTA10/S357BH

Relevant IP income is the income derived from the exploitation of qualifying IP rights as defined in S357BH. S357BH (12) ensures that a company is regarded as holding a qualifying IP right if it holds an exclusive licence of the right.

In many cases ‘RIPI’ and ‘relevant IP income’ will be synonymous. However RIPI is defined in 357BH(1) and in order for relevant IP income to be RIPI it must be included in the heads of income of the trade. RIPI could never include finance income which is specifically excluded by s357BG. RIPI cannot include any income not taken into account in computing trading profits.

The legislation splits the exploitation of IP rights into five different heads:

CIRD220170	Head 1 - sales income
CIRD220200	Head 2 - licence fees
CIRD220220	Head 3 - proceeds of sale
CIRD220230	Head 4 - damages for infringement
CIRD220240	Head 5 - other compensation

If a company derives some of its income from the exploitation of the patented invention but the income does not fall into any of the five heads, it may be able to deem some of that income to be RIPI as a ‘notional royalty’ for the patented item (CIRD220250).