Commentary

B5.333 Purchase and sale of patent rights

Business tax
Business tax | Commentary

B5.333 Purchase and sale of patent rights

Business tax | Commentary

B5.333 Purchase and sale of patent rights

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. The commentary below relates to pre-FA 2002 assets where it refers to corporation tax.

The purchase and sale of all or part of a patent right is a transaction of a capital nature, except in the hands of a person who carries on a trade of dealing in such rights (in which case the purchase or sale is a trading transaction)1. Capital allowances may be claimed on the cost of acquiring a patent right and any sale of that right will give rise to a balancing allowance or balancing charge (see Division B3.6). A balancing charge is restricted to the amount of capital allowances given; if the patent right has increased in value (eg if the invention is commercially successful), the sale proceeds may exceed the original cost and the rules below describe the taxation treatment of such a profit.

The word 'patent' is not defined in the Taxes Acts. It consists of rights conferred by letters patent to the exclusive use and benefits of a particular invention and will last for a specified period2. A patent is a form of protection for an inventor. A person who wants to use an invention that has been patented must acquire rights to use the patent or be granted a licence to use it.

'Patent right' means

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