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Amendment of section 234 (certain income derived from patent royalties) of Principal Act.
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45.— (1) Section 234 of the Principal Act is amended—
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(a) in subsection (1)—
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(i) by inserting the following before the definition of “ income from a qualifying patent ”:
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“ ‘ EEA Agreement ’ means the Agreement on the European Economic Area signed at Oporto on 2 May 1992, as adjusted by the Protocol signed at Brussels on 17 March 1993;
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‘ EEA state ’ means a state which is a Contracting Party to the EEA Agreement;”,
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(ii) in the definition of “ qualifying patent ” by substituting “in an EEA state;” for “in the State;”,
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(b) by inserting the following after subsection (3):
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“(3A) (a) Notwithstanding subsection (2) but subject to paragraphs (b) to (d), so much of the aggregate of the amounts of any income from qualifying patents arising to a person in a relevant period which would, apart from this subsection, be disregarded under subsection (2) for the purposes of income tax or corporation tax as exceeds €5,000,000 shall not be so disregarded.
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(b) Where—
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(i) in relation to a company, income from qualifying patents arising in a relevant period would, apart from this paragraph, be disregarded under subsection (2), and
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(ii) in relation to one or more persons who are connected (within the meaning of section 10) with the company referred to in subparagraph (i), income from qualifying patents arising in that relevant period would, apart from this paragraph, be disregarded under subsection (2),
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then the aggregate of the amounts of income from qualifying patents, which is to be disregarded under subsection (2), arising to the company and all of those persons in the relevant period shall not be greater than €5,000,000.
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(c) Where the aggregate of the amounts of income from qualifying patents in a relevant period arising to a company and all of the persons referred to in paragraph (b) which would, apart from paragraph (b), be disregarded under subsection (2) exceeds €5,000,000, the amount of any income from qualifying patents which is to be so disregarded for the relevant period in relation to the company or any person referred to in paragraph (b) shall be—
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(i) so much of €5,000,000 as is allocated to the company or that person in the manner specified in a notice made jointly in writing to the appropriate inspector by the company and the connected persons on or before the time by which a return under section 951 is to be made for the latest chargeable period (within the meaning of section 321(2)) of—
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(I) the company, or
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(II) any of those persons,
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which falls wholly or partly into the relevant period: but the aggregate of the amounts allocated to the company and all of the persons referred to in paragraph (b) in relation to the relevant period shall not exceed €5,000,000, and
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(ii) where no such notice is given, an amount determined by the formula—
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€5,000,000 x P
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T
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where—
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P is the aggregate of the amounts of income from qualifying patents arising to the company, or as the case may be the person, in the relevant period, and
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T is the aggregate of the amounts of income from qualifying patents arising to the company and all of the persons referred to in paragraph (b) in the relevant period.
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(d) For the purposes of this subsection, where a relevant period does not coincide with an accounting period of a company—
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(i) the amount of income from qualifying patents arising to the company in the relevant period shall be the aggregate of the amounts of income from qualifying patents arising to the company in any accounting period or part of an accounting period falling within the relevant period,
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(ii) income from qualifying patents arising to a company in an accounting period shall be treated as arising in part of that accounting period on a time basis according to the respective lengths of the part and the whole of the accounting period, and
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(iii) subject to the preceding provisions of this paragraph, income arising in a relevant period that is to be disregarded under subsection (2) shall be treated as representing income of an accounting period only to the extent that it cannot be treated as representing income of an earlier period, or part of such period.
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(e) In this subsection—
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‘ income from qualifying patents ’ means income from a qualifying patent or from more than one such patent;
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‘ relevant period ’ means the period of 12 months commencing on 1 January 2008 and each subsequent period of 12 months.”.
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(2) (a) Subsection (1)(a) applies as respects income from a patent in relation to which the research, planning, processing, experimenting, testing, devising, designing, developing or similar activity leading to the invention which is the subject of the patent is carried out on or after 1 January 2008.
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(b) Subsection (1)(b) applies as respects a relevant period beginning on or after 1 January 2008.
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