Income and Corporation Taxes Act 1988

521 Provisions supplementary to section 520. U.K.

M1 (1) For the purposes of section 520(4) to (6), a person’s qualifying expenditure for a chargeable period is the aggregate of the following amounts—

(a) any capital expenditure incurred by him on the purchase of patent rights, being expenditure incurred during the chargeable period or its basis period or at any previous time, other than expenditure which, or any part of which, has formed part of his qualifying expenditure for any previous chargeable period; and

(b) if, for the chargeable period immediately preceding the chargeable period in question, there was an excess of qualifying expenditure over disposal value, the balance of that excess after deducting any writing-down allowance under section 520(4)(a) made by reference to that excess.

(2) If, in any chargeable period or its basis period, a person sells the whole or any part of any patent rights on the purchase of which he has incurred capital expenditure, then, for the purposes of section 520(4) to (6) and subsection (1) above, he is required to bring into account for that chargeable period disposal value equal, subject to subsections (3) and (4) below, to the net proceeds to him of that sale.

(3) The disposal value to be brought into account by any person in respect of any patent rights as a result of one or more sales falling within subsection (2) above shall not (or, as the case may be, shall not in the aggregate) exceed the capital expenditure incurred by him on the purchase of those rights.

(4) Where the person mentioned in subsection (3) above has acquired the patent rights as a result of a transaction which was, or a series of transactions each of which was, between persons who are connected with each other within the terms of section 839, that subsection shall have effect as if it referred to the capital expenditure on the purchase of the rights incurred by whichever party to that transaction or to any of those transactions incurred the greatest such expenditure.

(5) Where a person incurs capital expenditure on the purchase of patent rights and either—

(a) he and the seller are connected with each other F1 . . . , or

(b) it appears with respect to the sale, or with respect to transactions of which the sale is one, that the sole or main benefit which, but for this subsection, might have been expected to accrue to the parties was the obtaining of an allowance under section 520(4),

there shall be disregarded for the purposes of section 520(4) and (6) and subsection (1) above so much (if any) of that expenditure as exceeds [F2 the relevant amount determined in accordance with subsection (6)below].

[F3 (6) The relevant amount referred to in subsection (5) above is—

(a) in a case in which, by virtue of subsections (2) to (4) above, a disposalvalue falls to be brought into account by reason of the sale, an amount equalto that disposal value,

(b) in a case in which no disposal value falls to be brought into account asmentioned in paragraph (a) above, but the seller receives on the sale acapital sum in respect of which he is chargeable to tax in accordance withsection 524, an amount equal to that sum,

(c) in any other case, an amount equal to whichever of the following is thesmallest—

(i) the price which the rights would have fetched if sold in the open market,

(ii) where capital expenditure was incurred by the seller on acquiring therights, the amount of that expenditure,

(iii) where capital expenditure was incurred by any person connected with theseller on acquiring the rights, the amount of the expenditure incurred by thatperson.

(7) Section 839 (connected persons) shall apply for the purposes of thissection.]

Textual Amendments

F1 Words in s. 521(5) repealed (with effect in accordance with Sch. 13 para. 27(4) of the repealing Act) by Finance Act 1989 (c. 26), Sch. 13 para. 27(2)(a), Sch. 17 Pt. 6,

F2 Words in s. 521(5) substituted (with effect in accordance with Sch. 13 para. 27(4) of the amending Act) by Finance Act 1989 (c. 26), Sch. 13 para. 27(2)(b)

F3 S. 521(6)(7) substituted (with effect in accordance with Sch. 13 para. 27(4) of the amending Act) by Finance Act 1989 (c. 26), Sch. 13 para. 27(3)

Marginal Citations

M1 Source - 1985 Sch.18 Part I 2-4