Patent allowances
Produced in partnership with Anne Fairpo of Temple Tax Chambers
Patent allowances

The following Tax practice note Produced in partnership with Anne Fairpo of Temple Tax Chambers provides comprehensive and up to date legal information covering:

  • Patent allowances
  • Patent allowances
  • Qualifying expenditure
  • Trading and non-trading expenditure
  • Restrictions on qualifying expenditure
  • Calculating the allowance
  • Example
  • Reduction in patent allowance
  • Available qualifying expenditure
  • Total disposal receipts
  • More...

Capital allowances are available and provide a deduction for capital expenditure on acquiring two particular types of intangible fixed asset:

  1. patents (which are considered in this Practice Note), and

  2. know-how (for which, see Practice Note: Know-how allowances)

These allowances are principally available to individuals and other unincorporated entities for new acquisitions.

For companies, capital allowances are only available for qualifying capital expenditure on patents where the acquirer is not within the corporate intangibles tax regime in respect of the patent. For more, see Practice Notes: How intangible fixed assets are taxed—basic principles and Amortisation of intangible fixed assets.

Patent allowances

Capital allowances for patents are available on ‘qualifying expenditure’ on the ‘purchase of patent rights’.

A ‘patent right’ is defined as ‘the right to do or authorise the doing of anything which would, but for that right, be an infringement of a patent’. This is a very broad definition. There is no geographical restriction on the term and so it should cover patents registered anywhere in the world.

The ‘purchase of patent rights’ includes the acquisition of a licence in respect of a patent, not simply the outright acquisition of patent rights. This is consistent with the broad definition of ‘patent rights’. A non-exclusive limited term licence should be capable of qualifying for the patent allowances (if it has a sufficiently enduring benefit to the business).

Qualifying expenditure

Expenditure qualifying for patent

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