Commentary

B5.330 Patent payments of an income nature

Business tax
Business tax | Commentary

B5.330 Patent payments of an income nature

Business tax | Commentary

B5.330 Patent payments of an income nature

The corporate tax treatment of intangible assets, including patents, acquired or created on or after 1 April 2002 is set out in the corporate intangible regime as detailed in Division D1.6.

A royalty or other sum in respect of the user of a patent is payable under deduction of tax (see B5.332). Case law has established that this does not include payments of a capital nature.

As regards payment of patent royalties without deduction of tax to an associated company in an EU member state, see A4.450–A4.455.

The distinction between capital and income payments in respect of patents, as elsewhere, is often hard to draw. The question was dealt with in general terms by Sir Wilfrid Greene MR, in British Salmson Aero Engines Ltd's'1 as follows:

'… there have been … many cases where this matter of capital or income has been debated. There have been many cases which fall upon the borderline: indeed, in many cases it is almost true to say that the spin of a coin would decide the matter almost as satisfactorily as an attempt to find reasons…

I am unable to read this legislation as deciding that class of problem in the matter of

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