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A UK headed group holds intellectual property (IP) in two different companies, one resident in the UK (Company Y) and the other in a zero tax territory (Company Z). Company Y holds patents and related IP for products manufactured and marketed by the group around the world. Company Z holds software which is used by one of the group’s businesses across Latin America and which is also licensed to third parties in Spanish and Portuguese speaking countries.

Company Z has become aware of a potential issue with a European company involving an infringement of its patents. It then learns that a similar issue had come up two years earlier when that same company had infringed patents belonging to another group company - Company Y in the UK. Company Y had successfully defended its IP rights.

Despite the differences between their businesses Company Z asks Company Y to look into the matter for them and to do some initial work under a service agreement made on arm’s length terms.

In considering TIOPA10/S371CA, Company Y’s activities under the service agreement are not seen as “relevant UK activities� as it is reasonable to suppose that unconnected companies would have entered into a similar arrangement. Again, Condition B is met.

Furthermore it is also considered that even if the provision of such advice from the UK constituted “relevant UK activities�, the exploitation of the IP and bearing of the related risks could not be seen as “managed or controlled to any significant extent� by way of these activities. Company Z had to evaluate the advice it received against its specific circumstances and decide for itself how to proceed.