755 Annual allowances for capital expenditure on purchase of patent rights

Summary

This section provides that capital allowances are available in respect of expenditure incurred on the acquisition of patent rights. The capital expenditure qualifying for the allowances is written off by equal annual instalments over a period of 17 years or, where the remaining life of the patent or the term for which the rights are acquired is a shorter period, over that shorter period. The Finance Act 2009 disapplies this section for companies subject to a transition period of two years during which time companies may elect to claim relief under this section for capital expenditure incurred on the purchase of patent rights after 7 May 2009 and before 7 May 2011.

Details

Writing-down allowances

(1) Writing-down allowances are made available for capital expenditure incurred on the purchase of patent rights. The allowances are only given, however, to a person who is a trader or to a person liable to tax in respect of the income from the patent rights.

Writing-down period

(2)(a) In general, the allowances are available over a writing-down period of 17 years beginning with the chargeable period in which the expenditure is incurred.

(2)(b) If, however, the patent rights are acquired for a specified shorter period, the allowances are given over that period.

(2)(c) Where purchased patent rights begin one complete year or more after the date from which the rights became effective (and subsection (2)(b) does not apply), the allowances are given over 17 years less the number of complete years which, when the rights begin, have elapsed since the rights became effective. If 17 complete years have so elapsed, the writing-down period is one year.

Pre-trading expenditure

(2)(d) Pre-trading expenditure is to be treated as incurred on the first day on which trading commences unless before that day the person concerned has sold all the patent rights on which that expenditure was incurred.

Discontinuance of relief for companies

(3) Subject to subsection (4) this section shall not apply to a company within the charge to corporation tax.

Election by companies to claim relief

(4) Notwithstanding the discontinuance of relief under this section for companies, this subsection allows a company to claim relief, on making an election to this effect, for capital expenditure incurred on the purchase of patent rights after 7 May 2009 and before 7 May 2011. The election must be made on the company’s statutory return for the accounting period of the company in which the expenditure is incurred and must be made not later than 12 months from the end of the accounting period in which the capital expenditure, giving rise to the claim, is incurred.

Relevant Date: Finance Act 2019