Income Tax (Trading and Other Income) Act 2005

Relief from income tax on patent income

600 Relief for expenses: patent income

(1) Relief may be claimed under this section for—

(a) inventor’s expenses, and

(b) patent application and maintenance expenses.

(2) In this section “inventor’s expenses” means expenses which—

(a) have been incurred by an individual who, alone or jointly, devised an invention for which a patent has been granted, and

(b) are attributable to devising it.

(3) In this section “patent application and maintenance expenses” means expenses incurred by a person in connection with—

(a) the grant or maintenance of a patent,

(b) the extension of the term of a patent, or

(c) a rejected or abandoned application for a patent,

but not incurred for the purposes of any trade carried on by the person.

(4) Relief may not be claimed under this section for patent application and maintenance expenses unless they are expenses which would, if incurred for the purposes of a trade, have been allowable as a deduction in calculating the profits of the trade.

(5) Relief may not be claimed under this section for any expenses if relief for them is given under—

(a) section 582 (calculation of income for the purposes of the charge to tax on royalties etc.), or

(b) any other provision of the Tax Acts.

(6) This section needs to be read with section 603 (contributions to expenditure).

601 How relief is given under section 600

(1) This section sets out how relief for expenses is given where a person makes a claim under section 600.

(2) The amount of the expenses must be deducted from or set off against the person’s income from patents for the tax year in which the expenses were incurred.

(3) If the amount to be allowed is greater than the amount of the person’s income from patents for that tax year, the excess must be deducted from or set off against the person’s income from patents for the next tax year, and so on for subsequent tax years, without the need for a further claim.

(4) In this section “income from patents” means—

(a) royalties or other sums paid in respect of the use of a patent (whether chargeable under this Chapter or otherwise),

(b) amounts on which tax is payable under section 587, 593 or 594, and

(c) amounts on which tax is payable under—

(i) section 472(5) of CAA 2001 (patent allowances: balancing charges), or

(ii) paragraph 100 of Schedule 3 to that Act (balancing charges in respect of pre-1st April 1986 expenditure on the purchase of patent rights).

(5) In this section references to a person’s income from patents are to the income after any allowance has been deducted from or set off against it under section 479 of CAA 2001 (certain allowances against income from patents).