Income and Corporation Taxes Act 1988

528 Manner of making allowances and charges. U.K.

M1 (1) An allowance or charge under section 520, 522 or 523 shall be made to or on a person in taxing his trade if—

(a) he is carrying on a trade the [F1 profits] of which are, or, if there were any, would be, chargeable to tax under Case I of Schedule D for the chargeable period for which the allowance or charge is made, and

(b) at any time in that chargeable period F2 . . . the patent rights in question, or other rights out of which they were granted, were or were to be used for the purposes of that trade.

(2) Where an allowance falls to be made to a person for any year of assessment under section 520, 522, 523 or 526 as those provisions apply for the purposes of income tax, and the allowance is not to be made in taxing a trade—

(a) the amount of the allowance shall be deducted from or set off against his income from patents for that year of assessment, and

(b) if the amount to be allowed is greater than the amount of his income from patents for that year of assessment, the balance shall be deducted from or set off against his income from patents for the next year of assessment, and so on for subsequent years of assessment, and tax shall be discharged or repaid accordingly.

Relief shall be given under this subsection on the making of a claim.

(3) Where an allowance falls to be made to a company for any accounting period under section 520, 522, 523 or 526 as those provisions apply for the purposes of corporation tax, and is not to be made in taxing a trade—

(a) the allowance shall, as far as may be, be given effect by deducting the amount of the allowance from the company’s income from patents of the accounting period;

(b) where the allowance cannot be given full effect under paragraph (a) above in that period by reason of a want or deficiency of income from patents, then (so long as the company remains within the charge to corporation tax) the amount unallowed shall be carried forward to the succeeding accounting period, and shall be treated for the purposes of that paragraph, and of any further application of this paragraph, as the amount of a corresponding allowance for that period.

(4) Effect shall be given to any balancing charge under section 520 or 523 which is not to be made in taxing a trade—

(a) if a charge to income tax, by making the charge under Case VI of Schedule D;

(b) if a charge to corporation tax, by treating the amount on which the charge is to be made as income from patents.

Textual Amendments

F1 Words in s. 528(1)(a) substituted (31.7.1998) by Finance Act 1998 (c. 36), s. 46(3)(a), Sch. 7 para. 1

F2 Words in s. 528(1)(b) repealed (with effect in accordance with ss. 211(2), 218(1)(b) of the repealing Act) by Finance Act 1994 (c. 9), s. 214(5)(b), Sch. 26 Pt. 5(24), Note 5 (with Sch. 20)

Marginal Citations

M1 Source-1970 s.385; 1985 s.64(2)(d)-(f)