Section 1: Trading Profits Taxable at the Northern Ireland Rate Chapter 15
86.Chapter 15 modifies the operation of Part 8A of CTA 2010 (profits from the exploitation of patents etc.) where a company is a Northern Ireland company.
87.Under Part 8A of CTA 2010, a company may elect that any relevant IP profits of a trade of the company for an accounting period for which it is a qualifying company are chargeable at an IP rate of corporation tax. Effect is given to an election by allowing a deduction to be made in calculating the profits of the trade for the period.
88.Section 357VA modifies section 357A to provide for a mainstream deduction and a Northern Ireland deduction.
89.The mainstream deduction is calculated in accordance with section 357A but by reference to relevant mainstream IP profits of the trade. The relevant mainstream IP profits of the trade are so much of the relevant IP profits of the trade as are not Northern Ireland IP profits of the trade.
90.Section 357VA sets out how the amount of the Northern Ireland deduction is calculated and provides that a deduction is only due if the Northern Ireland rate is higher than the special IP rate of corporation tax specified in section 357A(4).
91.The mainstream deduction is allowable as a deduction in computing mainstream profits or mainstream losses in accordance with Chapters 6 and 7 of Part 8B of CTA 2010.
92.The Northern Ireland deduction is allowable as a deduction in computing the Northern Ireland profits or Northern Ireland losses in accordance with Chapters 6 and 7.
93.The relevant Northern Ireland IP profits of a Northern Ireland company meeting the SME condition which does not carry on an excluded trade are set out in section 357VB. The company’s relevant Northern Ireland IP profits are the relevant IP profits of the trade excluding any amounts treated by section 747 of CTA 2009 as receipts or expenses of a trade in respect of pre-commencement assets. Any relevant IP profits attributable to qualifying IP right or licence to such a right held by the company for the purposes of an excluded activity are also excluded.
94.The relevant Northern Ireland IP profits of a Northern Ireland company meeting the large company condition which does not carry on an excluded trade are set out in section 357VC. The company’s relevant Northern Ireland IP profits are the appropriate proportion of the relevant IP profits. This proportion is the proportion of the profits of the company’s trade attributable to relevant rights that are attributable to either the company’s NIRE in accordance with Chapter 7 or are Northern Ireland intangibles credits or debits under Chapter 8. Relevant rights are qualifying IP rights, or exclusive licences to qualifying IP rights, which are held by the company.
95.In computing the relevant IP profits section 357VD makes clear that any set-off amounts under Chapter 5 of Part 8A are taken into account before the provisions of this Chapter are applied.