Income and Corporation Taxes Act 1988

524 Taxation of receipts from sale of patent rights. U.K.

(1) M1 Subject to subsection (2) below, where a [F1 company] resident in the United Kingdom sells all or any part of any patent rights and the net proceeds of the sale consist wholly or partly of a capital sum, [F1 the company] shall, subject to the provisions of this Chapter, be charged to [F2 corporation tax] under Case VI of Schedule D, for the [F3 accounting] period in which the sum is received by [F1 it] and successive [F3 accounting] periods, being charged in each period on the same fraction of the sum as the period is of six years (or such less fraction as has not already been charged).

(2) If the [F4 company] by notice served on [F5 an officer of the Board within the period specified in subsection (2A) below], elects that the whole of the sum shall be charged to [F6 corporation] tax for [F7 the [F8 accounting] period in which it was received], it shall be charged to [F6 corporation] tax accordingly.

[F9 (2A) The period mentioned in subsection (2) above is—

(a) F10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(b) F11 . . . the period of two years beginning at the end of the accounting period in which the sum was received.]

(3) [F12 M2 Where a relevant non-resident company] sells all or any part of any patent rights and the net proceeds of the sale consist wholly or partly of a capital sum, and the patent is a United Kingdom patent, then, subject to the provisions of this Chapter—

(a) [F13 the company shall be chargeable to corporation tax] in respect of that sum under Case VI of Schedule D; and

(b) section 349(1) shall apply to that sum as if it was an annual sum payable otherwise than out of profits or gains charged to income tax; and

(c) all other provisions of the Tax Acts shall, save as therein otherwise provided, have effect accordingly.

(4) F14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F15 (5) In subsection (3) above “relevant non-resident company” means a company not resident in the United Kingdom which would be within the charge to corporation tax in respect of any proceeds of the sale of the patent rights not consisting of a capital sum.]

(6) Where subsection (3) applies to charge a company to corporation tax in respect of a sum paid to it, F16 . . . the company may, by notice given to the Board not later than two years after the end of the accounting period in which the sum is paid, elect that the sum shall be treated as arising rateably in the accounting periods ending not later than six years from the beginning of that in which the sum is paid (being accounting periods during which the company remains within the charge to corporation tax in respect of any proceeds of the sale not consisting of a capital sum), and there shall be made all such repayments of tax and assessments to tax as are necessary to give effect to any such election.

(7) M3 Subject to subsections (8) and (9) below, where the [F17 company] selling all or any part of any patent rights (“the seller”) acquired the rights sold, or the rights out of which they were granted, by purchase and the price paid by [F18 it] consisted wholly or partly of a capital sum, the preceding provisions of this section shall apply as if any capital sum received by [F18 it] when [F19 it] sells the rights were reduced by the amount of that sum.

(8) Where between the purchase and the sale the seller has sold part of the rights acquired by [F20 it] and the net proceeds of that sale consist wholly or partly of a capital sum, the amount of the reduction falling to be made under subsection (7) above in respect of the subsequent sale shall be itself reduced by the amount of that sum.

(9) Nothing in subsections (7) and (8) above shall affect the amount of income tax which is to be deducted and assessed under section 349(1) and (3) by virtue of subsection (3) above, and, where any sum is deducted under section 349(1), any adjustment necessary to give effect to the provisions of this subsection shall be made by way of repayment of tax.

(10) M4 A claim for relief under this section shall be made to the Board.

Textual Amendments

F1 Words in s. 524(1) substituted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 201(2)(a) (with Sch. 2)

F2 Words in s. 524(1) substituted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 201(2)(b) (with Sch. 2)

F3 Words in s. 524(1) substituted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 201(2)(c) (with Sch. 2)

F4 Word in s. 524(2) substituted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 201(3)(a) (with Sch. 2)

F5 Words in s. 524(2) substituted (with effect in accordance with s. 135(2) of the amending Act) by Finance Act 1996 (c. 8), Sch. 21 para. 15(2)(a)

F6 Words in s. 524(2) inserted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 201(3)(b) (with Sch. 2)

F7 Words in s. 524(2) substituted (with effect in accordance with s. 135(2) of the amending Act) by Finance Act 1996 (c. 8), Sch. 21 para. 15(2)(b)

F8 Word in s. 524(2) substituted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 201(3)(c) (with Sch. 2)

F9 S. 524(2A) inserted (with effect in accordance with s. 135(2) of the amending Act) by Finance Act 1996 (c. 8), Sch. 21 para. 15(3)

F10 S. 524(2A)(a) repealed (6.4.2005 with effect in accordance with s. 883(1) of the repealing Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 201(4)(a), Sch. 3 (with Sch. 2)

F11 Words in s. 524(2A)(b) repealed (6.4.2005 with effect in accordance with s. 883(1) of the repealing Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 201(4)(b), Sch. 3 (with Sch. 2)

F12 Words in s. 524(3) substituted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 201(5)(a) (with Sch. 2)

F13 Words in s. 524(3)(a) substituted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 201(5)(b) (with Sch. 2)

F14 S. 524(4) repealed (6.4.2005 with effect in accordance with s. 883(1) of the repealing Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 201(6), Sch. 3 (with Sch. 2)

F15 S. 524(5) substituted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 201(7) (with Sch. 2)

F16 Words in s. 524(6) repealed (6.4.2005 with effect in accordance with s. 883(1) of the repealing Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 201(8), Sch. 3 (with Sch. 2)

F17 Word in s. 524(7) substituted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 201(9)(a) (with Sch. 2)

F18 Words in s. 524(7) substituted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 201(9)(b) (with Sch. 2)

F19 Word in s. 524(7) substituted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 201(9)(c) (with Sch. 2)

F20 Word in s. 524(8) substituted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 201(10) (with Sch. 2)

Modifications etc. (not altering text)

C1 See S.I. 1970 No.488 (under

“Double taxation relief: general”

in Part III Vol.5) regns. 2-10—payments exempt under double taxation agreements.

Marginal Citations

M1 Source - 1970 s.380(1)

M2 Source - 1970 s.380(2)

M3 Source - 1970 s.380(4)

M4 Source - 1970 s.380(5)