Finance Act 1989

Patent rights

27 (1) Section 521 of the Taxes Act 1988 shall be amended as follows.

(2) In subsection (5) (which limits allowable expenditure in the case of certain sales entered into between connected persons or for the purpose of obtaining an allowance)—

(a) the words “within the terms of section 839” shall be omitted, and

(b) for the words “the disposal value” onwards there shall be substituted the words “the relevant amount determined in accordance with subsection (6) below”.

(3) After subsection (5) there shall be added—

“(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 disposal value falls to be brought into account by reason of the sale, an amount equal to that disposal value,

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

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

(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 the rights, the amount of that expenditure,

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

(7) Section 839 (connected persons) shall apply for the purposes of this section.”

(4) This paragraph shall have effect in relation to expenditure incurred on or after the day on which this Act is passed.