Income Tax (Trading and Other Income) Act 2005

207 (1) Amend section 531 (disposals of know-how) as follows.

(2) In subsection (1)—

(a) for “a person” substitute “a company”,

(b) for “him”, in both places where it occurs, substitute “the company”,

(c) for “tax”, in both places where it occurs, substitute “corporation tax”, and

(d) for “all purposes” substitute “the purposes of corporation tax”.

(3) For subsection (2) substitute—

“(2) Subject to subsection (3) below, where—

(a) a person carrying on a trade receives consideration for the disposal of know-how which has been used in the trade, and

(b) the know-how is disposed of as part of the disposal of all or part of the trade,

the consideration shall for the purposes of corporation tax be treated as a payment for goodwill in relation both to the person making the disposal and to the person acquiring the know-how (if that person provided the consideration).”

(4) In subsection (3)(a) for “to either of the persons concerned if they so elect” substitute “if, in the case of the person disposing of the know-how being within the charge to corporation tax, that person and the person acquiring the know-how (whether or not within the charge to corporation tax) elect for that subsection not to apply”.

(5) After subsection (3) insert—

“(3A) If—

(a) an election is made under section 194 of ITTOIA 2005 (provision corresponding to subsections (2) and (3) of this section for the purposes of income tax), and

(b) the person making the acquisition mentioned in that section is within the charge to corporation tax,

the persons making the election under that section are treated as also making an election under subsection (3) of this section (even though the person disposing of the know-how is not within the charge to corporation tax).”

(6) In subsection (4)—

(a) for “person” substitute “company”,

(b) for “him” substitute “the company”, and

(c) for “tax”, in both places where it occurs, substitute “corporation tax”.

(7) In subsection (5)—

(a) for “person” substitute “company”, and

(b) for “tax” substitute “corporation tax”.

(8) Omit subsection (6).

(9) In subsection (7) for “(6)” substitute “(5)”.